Gift
Definition and meaning of Gift in real estate.
A gift is a sum of money provided to a home buyer by a relative, domestic partner, or authorized source to assist with the down payment or closing costs. Unlike a loan, this money does not need to be repaid, which must be documented for the lender.
In more detail
Lenders allow buyers to use gift funds to make home purchases more affordable, but they require strict documentation to ensure the funds are not a hidden loan. The donor must provide a signed gift letter stating their relationship to the buyer, the amount of the gift, and confirming that repayment is not expected.
Lenders also require a paper trail, which may include bank statements showing the transfer of funds from the donor to the buyer or escrow company. Requirements regarding who can provide a gift and how much is allowed can vary depending on the loan program.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Who pays | Relative, fiancé, or domestic partner of the buyer |
| Required by | Mortgage underwriters to verify the funds are not a loan |
| Required Documents | Signed gift letter and bank statements tracking the transfer of funds |
To help their son buy his first condo, the parents provided a cash gift and signed a gift letter for the mortgage lender confirming the funds did not require repayment.
Frequently asked questions
Can a friend give me a gift for a down payment?
For conventional loans, donors are usually restricted to family members, but some government-backed programs like FHA loans may allow gifts from close friends or employers.
Do gift funds have tax implications?
The donor, not the recipient, may be subject to the federal gift tax if the amount exceeds annual exclusion limits, though tax laws are subject to change.
Related terms
Sources & references
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