Yes, you can usually use gift money for your down payment and closing costs. FHA, VA, USDA, and conventional loans all allow gifts from acceptable donors, as long as the money truly doesn't have to be paid back, the donor signs a gift letter, and there's a paper trail showing the money moving from the donor to you or to the title company. Who counts as an acceptable donor, and whether you need some of your own money too, depends on the loan program.
Here's how each program handles gifts, what the gift letter needs to say, how the money should move, and the mistakes that slow files down.
HUD defines gifts as contributions of cash or equity with no expectation of repayment (HUD Handbook 4000.1, II.A.4.d.iii(F)). The other programs say the same thing in their own words. If anyone expects to be paid back, even informally, it's a loan, not a gift. A loan from a relative has to be disclosed as a debt, and it's treated very differently.
The reason lenders care so much: your down payment can't be borrowed money disguised as savings. The gift rules exist to prove the money is really yours to keep.
For FHA loans, HUD allows gifts from (HUD Handbook 4000.1, II.A.4.d.iii(F)(2)(a)):
HUD also says cash on hand isn't an acceptable source of donor gift funds. Your aunt can't hand over an envelope of cash. A gift toward your minimum required investment also has to meet HUD's separate source rules, which keep sellers, agents, builders, and other interested parties from funding it. On a manually underwritten FHA loan, HUD adds that surplus gift funds can't count as cash reserves (II.A.5.c.iii(F)).
For conventional loans, Fannie Mae allows a gift from a relative (your spouse, child, or other dependent, or anyone related to you by blood, marriage, adoption, or legal guardianship) or from a non-relative with a familial relationship: a domestic partner or their relative, a fiance, a former relative, or someone with a long-standing familial-like or mentorship relationship with you (Fannie Mae Selling Guide B3-4.3-04, dated Feb 4, 2026).
A few conventional rules people don't expect:
Freddie Mac's gift rules are in Guide Section 5501.3. They also limit donors to related persons and exclude interested parties, with their own definitions and details, so your lender checks the specific Freddie requirements when the loan goes that way.
The VA Lenders Handbook allows a gift from a donor with no affiliation with the builder, developer, real estate agent, or any other interested party. It doesn't print a family-only list (VA Pamphlet 26-7, Chapter 4, Topic 4.d, change date Feb 22, 2019). Many VA buyers don't need a down payment at all, but gifts can still help with closing costs or a price above the appraised value.
USDA allows gifts that don't come from anyone with an interest in the sale, such as the seller, builder, or real estate agent. Cash on hand isn't an acceptable donor source, and USDA treats gift funds as your own money, so excess gift funds can be returned to you at closing. Gift funds aren't counted as reserves (HB-1-3555, Chapter 9, Attachment 9-A, revised Aug 5, 2025).
Every program wants a signed gift letter. HUD requires the letter to be signed and dated by both the donor and the borrower. Across FHA, Fannie, VA, and USDA, it generally includes:
I'll give you the letter format. Have the donor fill it out completely. A letter with missing pieces is one of the most common reasons a file stalls near closing.
The letter says it's a gift. The paper trail proves it. HUD lists these as acceptable (4000.1, II.A.4.d.iii(F)(3)):
Fannie, VA, and USDA accept similar evidence, including the Closing Disclosure showing the donor's funds were received. My practical advice: the cleanest gift is a wire straight from the donor's account to the title company, with a gift letter that matches the amount to the dollar.
If the gift lands in your account first, expect the underwriter to match it on your bank statement. Gifts are one of the most common reasons for large deposit questions. And if gift money was used for your earnest money, HUD says that has to meet the same gift rules.
Whether a gift can count toward reserves, the money left in the bank after closing, depends on the program. Fannie allows gift funds for reserves, subject to its minimum contribution rules, but not a gift of equity. USDA says gift funds aren't eligible for reserves. On manually underwritten FHA loans, surplus gift funds can't count as reserves. If your approval depends on reserves, plan to show your own money there.
When a family member sells you their home for less than it's worth, the difference can be a gift of equity. HUD allows this only between family members (4000.1, II.A.4.d.iii(F)(4)). Fannie covers it in B3-4.3-05. My gift of equity article walks through how it works on a family sale.
Mortgage rules and tax rules are different. Whether the donor has to file a gift tax return depends on the IRS annual exclusion for that year, which changes, and on other gifts they've made. I don't give tax advice, and I don't print an exclusion amount here because it changes. The donor should check the IRS gift tax FAQ or talk to a tax preparer. The mortgage file needs the gift letter either way.
This example is made up to show how two gift files can go.
Ana is buying her first home in Fort Worth with an FHA loan. Her grandmother is giving her money toward the down payment. They sign a gift letter with the grandmother's contact information, relationship, exact amount, and a no-repayment statement. A few days before closing, the grandmother wires the money from her bank account directly to the title company. The wire confirmation matches the letter. That part of the file clears quickly.
Jordan, another buyer, deposits cash at three different branches over two weeks and says it was a gift from his uncle. There's no withdrawal on the uncle's statement, and HUD doesn't accept cash on hand as a donor source. The underwriter can't count that money until it's properly sourced. Jordan and his uncle end up redoing the gift as a documented transfer, which costs them time near closing.
If a family member wants to help with your purchase, call me before the money moves. I'll tell you which program fits, what the donor needs to sign, and the cleanest way to get the funds to closing. Book a call, or when you're ready, start an application.
Links checked Oct 21, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026