What Is a Gifted Deposit? Letters, Timing, and Tax

A gifted deposit for a mortgage is money a third party gives you toward your down payment or closing costs with no expectation of repayment. Because a true gift does not add to your debt, lenders will let you use it — but only after they confirm three things: that the donor is someone the loan program allows, that a signed gift letter says the money is not a loan, and that a clean paper trail shows the funds moving from the donor to you or the closing agent.

Who Is Allowed to Give You the Money

Eligibility depends on which loan you are getting.

Conventional Loans

Fannie Mae accepts gifts from a relative, a domestic partner or the domestic partner’s relative, a fiancé, a former relative, or someone with a long-standing familial or mentorship relationship with you. The donor cannot be the builder, developer, real estate agent, or anyone else with a financial interest in the sale. A seller can give the gift only if they are a qualifying relative with no other tie to an interested party in the deal.¹

FHA Loans

FHA rules open the door wider. Family members qualify, and so do an employer, a labor union, a charitable organization, or a government housing agency. A close friend can qualify as well, but the lender will ask for documentation showing a clearly defined, existing relationship.²

VA Loans

VA loans accept gifts from family, friends, or employers. Because most VA loans require no down payment, the money usually goes toward closing costs or reserves rather than the deposit itself.

Can the Whole Down Payment Be a Gift?

For most first-time buyers of a single-family home, yes. The details depend on the loan and the property.

On a conventional loan for a single-unit primary residence, no minimum personal contribution is required. The entire down payment can be gifted regardless of your loan-to-value ratio.¹

On a conventional loan for a two- to four-unit primary residence or a second home with a loan-to-value ratio above 80%, you must put at least 5% of the purchase price in from your own funds. Gift money can cover the remainder of the down payment, closing costs, and reserves.¹

Investment properties are the boundary case: conventional financing does not allow gift funds toward an investment-property purchase at all.¹

One useful exception softens the 5% rule. If a qualifying donor has lived with you for at least 12 months and will continue living with you in the new home as a primary residence, their gift is treated as your own funds. A live-in partner’s contribution can therefore satisfy the personal-contribution minimum on a multi-unit or second-home purchase.¹

FHA is more permissive. The full 3.5% minimum down payment can come from gift funds for any eligible property, with nothing required out of your own pocket.

What the Gift Letter Must Say

The gift letter is the document that turns money in your account into an acceptable down payment source. Without it, the lender will not count the funds. For a conventional loan the letter must include:

The donor’s name, address, and phone number
The donor’s relationship to you
The exact dollar amount of the gift, or the maximum amount being given
A statement that no repayment is expected or required

FHA gift letters follow the same format: donor identity, relationship, dollar amount, and a clear statement that repayment is not required.² Both you and the donor should sign. Some lenders also ask for the property address on the letter, though that is not universal.

The Paper Trail Your Lender Will Verify

The letter is only half the file. Underwriting also wants to see that the donor had the money and that the money actually moved. Plan to collect:

The donor’s bank statements, typically covering the last two to three months, showing sufficient funds before the withdrawal
Proof of transfer — a wire confirmation, canceled check, cashier’s check, or electronic transfer record from the donor’s account to yours or to the title company
Your own bank statement showing the matching deposit

If the money has not yet hit your account when the lender asks, a cashier’s check, money order, or wire receipt paired with the donor’s withdrawal statement is usually enough. When the gift came from selling stock, real estate, or another asset instead of a savings account, ask the donor for the settlement statement or brokerage record that shows where the cash originated.

Why Timing of the Deposit Matters

Lenders look for “seasoned” funds, meaning money that has sat in an established account long enough to rule out a temporary or fraudulent deposit. Most treat 60 to 90 days as seasoned. If gift money has been in your account that long and the balance has held steady, some lenders will not even require a separate gift letter, because the funds already read as your own savings.

Recent, unseasoned deposits get more scrutiny. A large deposit that appears during the documentation window will draw questions, and the lender may require the gift letter and transfer records before moving forward. Gathering everything early keeps this from turning into a closing delay. A mismatch between the letter amount and the actual transfer, or a gap in the paper trail, can push closing back or sink the application outright.

Gifts of Equity When You Buy from Family

If a relative is selling you the home, they can gift equity instead of cash. The seller agrees to a price below market value and the difference becomes your down payment.

Fannie Mae allows a gift of equity on a primary residence or second home. It can cover all or part of the down payment and closing costs, but it cannot count toward reserves. Donor eligibility and gift-letter rules match those for cash gifts, and the settlement statement must show the gift of equity.³

FHA also permits gifts of equity, but only between family members. FHA defines family broadly: parents, grandparents, children, stepchildren, siblings, aunts, uncles, in-laws, domestic partners, and foster or adoptive relatives.² A signed gift letter confirming no repayment is required.

Taxes: What the Donor Needs to Know

You, the recipient, owe no tax on a gifted deposit. Any tax question is the donor’s.

For 2026, a donor can give up to $19,000 per recipient per year without owing gift tax or filing a return.⁴ A married couple who elect to split gifts can combine exclusions and give up to $38,000 to one recipient, though both spouses must consent and at least one must file IRS Form 709.⁵

A gift above the annual exclusion is not automatically taxed. It gets reported on Form 709 and applied against the donor’s lifetime estate and gift tax exemption, which is $15,000,000 for 2026.⁶ So if a parent gives you $50,000, the first $19,000 is excluded, the remaining $31,000 goes on Form 709, and the donor almost certainly owes no actual tax. The return is a running tally, not a bill.⁷ The filing obligation still exists whenever a gift to one person exceeds the annual exclusion, even if nothing is owed.

One misconception worth clearing up: an ordinary cash gift for a down payment is not pulled back into the donor’s taxable estate if the donor dies within three years. The clawback rule in the tax code covers specific transfers like life insurance and property in which the donor retained certain rights, not straightforward cash.⁸

1
Fannie Mae. Personal Gifts
2
U.S. Department of Housing and Urban Development (HUD.gov). Does HUD Allow Gifts of Equity?
3
Fannie Mae. Gifts of Equity
4
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
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Internal Revenue Service. Instructions for Form 709 (2025)
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Internal Revenue Service. Whats New – Estate and Gift Tax
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Internal Revenue Service. About Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return
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Office of the Law Revision Counsel. 26 USC 2035 – Adjustments for Certain Gifts Made Within 3 Years of Decedents Death