A gift letter for a mortgage is a signed statement from someone giving you money toward your down payment or closing costs, confirming to your lender that the funds are a genuine gift with no expectation of repayment. It is not an IRS form and it is not a tax document. Lenders require it so they can tell the difference between money you were given and money you quietly owe, because an undisclosed loan changes your debt-to-income ratio and can sink your application.
What the Letter Has to Say
Every lender uses its own template, but the required content is consistent. A workable gift letter includes:
- Full legal names, addresses, and contact information for both the donor and the recipient.
- The relationship between the two, such as parent and child or grandparent and grandchild.
- The exact dollar amount of the gift.
- The address of the property being purchased, tying the gift to the specific transaction.
- An unequivocal statement that the money is a gift with no repayment expected at any point.
- The donor’s signature and date. Some lenders also want the recipient’s signature or a notary.
The no-repayment language is the heart of the document. If it is missing or hedged, the underwriter will treat the money as a loan.
The Paper Trail That Goes With It
The letter on its own will not close the loan. Underwriters want evidence that the money actually moved and that the donor had it to give. Plan on producing three things.
First, proof of transfer: a copy of the cleared check, the wire confirmation, or a withdrawal receipt showing funds leaving the donor’s account. Second, the donor’s bank statements covering roughly 30 to 60 days before the gift. These show the money was already there, not borrowed at the last minute from someone tied to the sale. Third, a deposit in your own account that matches the transfer in amount and date.
This is where deals stall. If the donor’s statements show a large deposit landing right before the gift, the underwriter will ask where that money came from and keep asking until the trail leads back to a legitimate, seasoned source.
Who Is Allowed to Give You the Money
The rules on acceptable donors depend on your loan program. Getting this wrong can pull your closing apart late in the process.
FHA Loans
FHA is relatively flexible on donors. Acceptable sources include a relative, your employer or labor union, a close friend with a clearly documented interest in your wellbeing, a charitable organization, or a government agency running a homeownership assistance program. Gift funds can cover the entire down payment and closing costs.
The hard line: the donor cannot be anyone with a financial interest in the sale, meaning the seller, the real estate agent, the builder, or an entity connected to them. Gifts from those parties are recharacterized as sales concessions and knocked off the purchase price. FHA also will not accept cash on hand as the donor’s source of funds.1U.S. Department of Housing and Urban Development. HUD 4155.1 Section B – Acceptable Sources of Borrower Funds
Conventional Loans
Fannie Mae’s rules are a bit narrower on who counts as a donor and more generous in other ways. Acceptable donors include relatives by blood, marriage, adoption, or legal guardianship, along with domestic partners, fiancés, former relatives, and people with a long-standing familial or mentorship relationship with you. The donor cannot be affiliated with the builder, developer, real estate agent, or any other interested party.
For a one-unit primary residence, your entire down payment can come from gift funds regardless of loan-to-value. For two-to-four-unit properties or second homes where you are putting down less than 20%, you need at least 5% from your own funds before gift money fills the gap. Gift funds are not allowed at all for investment properties.2Fannie Mae. Personal Gifts – Fannie Mae Selling Guide
VA Loans
VA guidelines are the most permissive of the three. The VA Lender’s Handbook does not impose specific restrictions on who may provide gift funds, though the lender should still obtain a gift letter documenting the transaction.3U.S. Department of Veterans Affairs. VA Home Loans – Assets
Gifts of Equity
A gift of equity is a variant worth understanding because it shows up often in family sales. It happens when a relative sells you their home for less than fair market value. If your parents’ house appraises at $300,000 and they sell it to you for $250,000, the $50,000 difference is a gift of equity, and lenders will typically let that equity stand in for your down payment. You can end up buying a family home with little or no cash out of pocket.
For conventional loans, Fannie Mae does not treat the donor of a gift of equity as an interested party to the transaction, even though they are also the seller. You still need a gift letter and the usual documentation, adapted to the equity structure rather than a cash transfer.2Fannie Mae. Personal Gifts – Fannie Mae Selling Guide
Does the Gift Create a Tax Problem?
The mortgage gift letter and federal gift tax reporting are separate things that happen to overlap when large sums move. As the recipient, you owe nothing and report nothing. Gift recipients do not include monetary gifts as income on their federal return, regardless of amount.4Internal Revenue Service. Gifts and Inheritances
The reporting sits with the donor, and only above a threshold. For 2026, the annual gift tax exclusion is $19,000 per recipient. A donor can give up to that amount to as many people as they want in a year with no IRS filing obligation. Above $19,000 to a single person, the donor files Form 709. Filing does not usually mean owing tax; it tracks use of the lifetime exemption, which is $15 million per individual for 2026 after the One Big Beautiful Bill Act.4Internal Revenue Service. Gifts and Inheritances5Internal Revenue Service. What’s New – Estate and Gift Tax
Married donors can elect to split gifts, effectively doubling the annual exclusion to $38,000 per recipient. In a gift of equity, the same rule applies: if the discount to fair market value exceeds the exclusion, the seller files Form 709 for the excess. The buyer still owes no income tax on the equity received.
One further reporting rule catches people using overseas family money. If you receive more than $100,000 in gifts from nonresident alien individuals or foreign estates in a tax year, you must file Form 3520, and you must individually identify each gift over $5,000. This obligation falls on you as the recipient, not the donor, and penalties for missing it can reach 25% of the unreported amount.6Internal Revenue Service. Instructions for Form 3520
So the practical picture is this. The mortgage gift letter is a lender document that has to say specific things and be backed by a specific paper trail. The tax question is separate, usually the donor’s problem, and only becomes a filing matter above the annual exclusion or, for foreign gifts, the $100,000 recipient threshold.