Gift letter for a mortgage: Rules, template, and example

Saving up for a down payment is one of the biggest hurdles to buying a home. If you’re fortunate enough to receive financial help from friends or family, you’ll need to document where those funds came from with a gift letter for a mortgage. Let’s walk through exactly what lenders require, who can provide these funds, and a template to write your letter.

Key takeaways:

• A gift letter for a mortgage is a signed document confirming that the funds you received for a down payment or closing costs are not a loan.
• Lenders require this letter to ensure the gift doesn’t increase your overall debt and to verify that the funds came from an acceptable source.
• You’ll also need to provide a clear paper trail for the transfer, such as bank statements or wire receipts showing the funds moving from the donor’s account to yours.

What is a gift letter for a mortgage?

When you apply for a home loan and intend to use gift money toward your down payment or closing costs, you’ll need to provide a gift letter to your lender.

A gift letter for a mortgage is a signed document that verifies for the lender that the funds you received are a gift and do not have to be repaid.

It should state who gave you the money, your relationship to them, the amount gifted, the date of the transfer, and the address of the property you’re using the money to buy.

The gift letter needs to explicitly state that the person giving you the money has no expectation of repayment. 

“Your lender will be reassured by this document that your debt-to-income ratio is accurate and that there are no hidden liabilities,” says Dennis Shirshikov, a professor of finance and economics at City University of New York, Queens College.

Why do lenders require a mortgage gift letter?

All types of lenders require a mortgage gift letter to ensure that the money isn’t a loan.

If you have to repay the money, it’s an additional financial liability. That added debt could strain your monthly budget and increase your risk of defaulting on the mortgage.

By signing a formal gift letter, both you and the donor certify that the money does not have to be repaid, so it is not included in your debt-to-income (DTI) ratio or in violation of lending laws.

Lenders must comply with federal guidelines issued by entities such as Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA). These agencies require lenders to verify that all down payment funds come from acceptable, legal sources.

If you receive a monetary gift to help you buy a home, the lender wants to know who the benefactor is, your relationship with that party, and the gift amount you received.

Creating, signing, and sending a gift letter to your lender safeguards you from liability. It confirms that the funds are a gift and that no repayment is expected. The letter also supports other documentation you provide to your lender that proves your available assets.

“Your lender might categorize the funds as a loan in the absence of a gift letter, which would change your financial profile and endanger loan approval,” Shirshikov says. “The letter protects both you and your lender by offering transparency, making sure you aren’t taking on more hidden debt, and assisting the lender in confirming the legitimacy of funding sources.”

What to include in a gift letter for a mortgage

To satisfy your underwriter’s gift letter requirements, your letter must be a structured document containing specific information. Here is a checklist of what to include.

Donor and borrower information

The letter must clearly identify everyone involved in the transaction. You need to include:

• The donor’s full legal name, current address, phone number, and email address.
• Your full legal name.
• Your relationship to the donor.

Gift amount, date, and property address

Your lender needs to tie the gift to your specific real estate transaction. Be sure that the letter lists:

• The exact amount being gifted.
• The date the funds were transferred or the date they will be transferred.
• The full address of the property you are purchasing.

Source of funds and transfer details

Underwriters must verify the origin of the funds to ensure compliance with federal regulations. The letter must detail:

• The name of the donor’s bank or financial institution.
• The account number – you may only need the last four digits – from which the funds are being drawn.

No repayment, no property interest, and arm’s-length language

To be accepted, the letter must include explicit language confirming three things:

1. No repayment. A clear statement that the money is a gift and there is no obligation, expectation, or implied agreement for repayment in the form of cash, future services, or otherwise.
2. No property interest. A confirmation that the donor has no ownership stake in the property now or in the future.
3. Arm’s-length transaction. A declaration that the funds did not come from any person or entity with a financial interest in the sale of the home, such as the seller, the builder, the real estate agent, or a loan officer. Buying a home from someone who can benefit from the sale is called a non-arm’s-length transaction.

How to write a gift letter for a mortgage

Are you planning to apply for a mortgage with funds you’ve been gifted by family or friends? Here’s a step-by-step guide to writing your gift letter.

State that the funds are a true gift

Begin the letter with a clear declaration that the money being provided is a gift. Do not use words like “loan” or “borrow.” The language must be permanent and definitive, so the lender knows you aren’t adding to your debt by accepting the money.

Identify the donor and borrower

Next, identify who is giving the money and who is receiving it. Be sure to specify your exact relationship. This is important because different loan programs have strict rules about who is allowed to provide gift funds.

Confirm the gift amount and source of funds

State the precise dollar amount. Then, clearly list the donor’s bank name and account number (or the last four digits). This helps the underwriter connect the dots when they review the accompanying bank statements and wire transfer receipts.

Sign and date the letter

Both the donor and the borrower must sign and date the document. Wet signatures (signed by hand in ink) are often preferred, though many lenders accept secure e-signatures through their own platforms.

Mortgage gift letter template

We’ve put together the following standard gift letter for a mortgage template to give you a starting place to write your own.

Mortgage gift letter example

[Date]

I/We, [Donor Name(s)], certify that I/we am/are providing a gift of $[Exact Gift Amount] to [Borrower Name(s)], my/our [Relationship to Borrower, e.g., son/daughter], to be applied toward the purchase of the property located at [Full Property Address].

I/We certify that this payment is a genuine gift and there is no obligation, expectation, or implied agreement for repayment in the form of cash, future services, or otherwise.

Furthermore, I/We certify that these funds were not made available to me/us by any person or entity with an interest in the sale of the property, including the seller, real estate agent, builder, or any associated entity. I/We also confirm that I/we have no ownership interest in this property now or in the future.

The funds were/will be withdrawn from: [Name of Donor’s Bank or Financial Institution] Account Number: [Donor’s Account Number or Last 4 Digits]

[Donor Signature] Date: [Date] [Donor Printed Name] [Donor Address] [Donor Phone Number] [Donor Email Address]

[Borrower Signature] Date: [Date] [Borrower Printed Name]

Gift letter template options

While the mortgage gift letter template above covers all the bases for standard underwriting, you can ask your loan officer if they have a preferred template. Many lenders have their own standardized, branded forms that they prefer you and your donor to sign.

Gift letter requirements by loan type

The rules about who can give you a down payment gift and how much they can give vary depending on the type of mortgage you are applying for. Let’s look at how it works with some common loan types.

Conventional loan gift letter rules

For conventional loans backed by Fannie Mae or Freddie Mac, gift funds can be used to cover your entire down payment if you are buying a one-unit primary residence. The donor must be an acceptable family member, including parents helping their children own a home, grandparents, siblings, spouses, domestic partners, and fiancées. Friends are generally not permitted to provide gift funds for conventional loans.

FHA loan gift letter rules

FHA loans have slightly more lenient gift fund policies. FHA loans allow your entire 3.5% down payment to come from a gift for a primary residence. FHA guidelines also offer a broader definition of acceptable donors. In addition to family members, you can receive gifts from close friends, employers, labor unions, or charitable organizations, provided the relationship is well-documented.

VA and USDA loan gift letter rules

VA loans and USDA loans generally do not require a down payment. However, if you choose to make one to reduce your monthly payment, both programs allow 100% of your down payment and closing costs to come from gift funds. The donor can be a family member or friend, provided they are not an interested party in the real estate transaction.

Rocket Mortgage currently doesn’t offer USDA loans.

Mortgage gift letter rules by property type

Your mortgage gift letter rules by property type also will dictate how you can use your funds. Depending on whether you plan to live in the home or rent it out, lenders view the risk differently.

• Primary residences: Using gift funds to buy the main home you will live in is widely accepted across all loan types, and you can often fund the entire down payment with a gift.
• Second homes: If you are buying a vacation home with a conventional loan, you can use gift funds. However, if your down payment is less than 20%, the lender may require that at least 5% of the down payment comes from your own personal savings.
• Investment properties: As a general rule, lenders do not allow you to use gift funds for the down payment on investment properties. Because investment properties carry a higher risk of default, lenders want to see that you have your own financial skin in the game.

Who can provide the down payment?

If you’re getting a conventional loan, Fannie Mae and Freddie Mac require that the gift money come from a member of your family. When buying a house with your child or receiving help from a family member, the relationship is easy to verify. Government-backed loans allow for gift money from other sources, too – including a friend, employer, charity, or labor union.

Can a friend give gift funds for a mortgage?

The answer depends on your loan program. Conventional loans generally do not allow gifts from friends. However, FHA, VA, and USDA loans do allow friends to provide gift funds, as long as you can document a long-standing, close personal relationship and prove they are not secretly a party interested in the sale of the home.

Who cannot provide mortgage gift funds?

Across all loan types, you can never accept a down payment gift from anyone who has a financial interest in the real estate transaction. This is known as an interested party contribution. Donors cannot be the home seller, builder, developer, or real estate agent involved in the deal. If a seller gives you money, it is considered a “seller concession,” which has its own limits and rules.

FAQ

Here are the answers to some frequently asked questions about mortgage gift letters.

Do you have to pay taxes on gift money?

You typically do not have to pay taxes on gift money as long as it falls under a certain amount. As of 2026, you can receive up to $19,000 in gift money without having to file a gift tax return. When someone gives a home to a family member or sells it to them at a discount, it’s called a gift of equity.

Is there a limit on how much down payment gift funds you can receive?

There is typically no limit on how much gift money you can receive. However, you will need to pay taxes on it if it is over the limit for that year.

Can you use gift money for costs other than the down payment?

Yes, you can use gifted funds to cover your down payment, pay your standard closing costs, or buy down your interest rate with mortgage points. The gift letter verifies that the funds entering the transaction are yours to keep.

The bottom line: A gift letter can help document mortgage gift funds

Accepting financial help from a generous loved one can be a meaningful way to finally achieve your dream of homeownership. Borrowers can typically use eligible gift funds to cover their down payments and closing costs when the funds come from an approved source, depending on their lender and loan program. By communicating early with your loan officer and providing a gift letter, you can keep the underwriting process moving smoothly.

When you feel ready to put those gift funds to work, start exploring your financing options and confidently apply for a mortgage with Rocket Mortgage today.