Mortgage Myth #30: “No, You Can’t Use Gift Funds for Your Down Payment.”

The Myth:

“No, you can’t use gift funds for your down payment.”

The Truth:

Gift funds are not only allowed — they’re a powerful tool for helping families build wealth together. Whether it’s parents helping kids, or adult children helping their parents buy closer to them, properly documented gift funds are welcome in nearly every major loan program.

Why People Believe This:

Because “gift” sounds like “free money,” many assume lenders don’t allow it. Plus, online misinformation has made people think you can only use your own savings or sell an existing home. The truth? Lenders simply need to verify the source and intent of the funds — not deny them.

Detailed Breakdown:

• FHA loans: Allow 100% of the down payment to come from a family gift.
• Conventional loans: Permit gift funds for primary residences (and even second homes, in some cases).
• VA loans: Often need no down payment at all — but gifts can help with closing costs or reserves.
• Documentation: Lenders require a gift letter and proof of transfer from an eligible donor — that’s it.

Gift funds aren’t just for first-time buyers. Move-up buyers often use gifts strategically to reduce loan amounts, avoid jumbo thresholds, or strengthen offers in competitive markets. And as multigenerational housing grows, families are combining resources to create long-term stability under one roof.

There's also a lot of mis-information around the gift tax rules. With the lifetime exclusionary gift tax exemption, many millions of dollars can be exempt from taxes. In other words, that worry is a myth; gift taxes are rarely an issue. See this FAQ on the IRS website for more information and consult your CPA, too.

Real-World Example:

One of our clients recently used a $25,000 gift from parents to bridge the gap on their move-up home purchase. That “gift” not only saved them from selling their existing home too soon — it let them buy first, then sell later. Another family used a smaller $7,000 gift from adult children to help mom buy a condo closer to grandkids.

The Bottom Line:

Gift funds are about connection, not complication. When families share financial strength, everyone wins — and lenders love that transparency.

Grab Your Guide:

Whether you’re a first-time buyer, experienced homeowner, or planning a multigenerational move, I’ve built free guides to walk you through your next step.

👉 Download them anytime at on my Specialty Programs Page.