Separate the gift from the full cash-to-close budget
The down payment is only one part of the amount needed for closing. A realistic budget also considers appraisal and inspection fees, lender and title charges, prepaid insurance, tax escrows and any earnest money already paid. Gift eligibility differs among FHA, conventional and other products, and allowable seller credits generally do not replace the borrower's required down payment. Have the lender itemize each line before comparing options.
- Write down expected gift amount and timing
- Request the latest program-specific cash-to-close worksheet
- Identify deposits, prepaids and seller credits separately
Document the source before transferring the money
Lenders commonly review a signed donor statement and evidence that the money was transferred and received. The documentation required can differ by product, donor relationship and timing. Avoid moving cash between multiple accounts without checking with the loan team: unexplained deposits may create follow-up requests near closing. A donor should understand that a genuine gift is not an undisclosed loan requiring repayment.
- Confirm the donor meets the program's eligibility rules
- Ask the lender for its gift-letter and transfer instructions
- Keep a clear record of any funds deposited
Compare gift-assisted options without assuming one wins
More available gift money might enable a conventional low-down-payment option, a different mortgage insurance structure or a standard FHA loan instead of assistance financing. It can also improve reserves rather than requiring every available dollar to be spent. Compare written scenarios using the same price, insurance, taxes and estimated closing date; then ask which obligations or repayment terms attach to each option.
- Compare assisted and standard financing side by side
- Check mortgage insurance, points and total upfront costs
- Keep the final program and gift documentation in the secure lender process
Official information
Terms, loan rules, funding and eligibility can change. These references are for education; always confirm the current written terms with the appropriate agency and lender.
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