What Is A Down Payment Gift?

A down payment gift is cash from friends or family, used to help buy real estate. By definition, a down payment gift does not get paid back.

April 06, 2020 by Dan Green

When you’re buying a house, you can use other people’s money to help get it done.

Real estate professionals call this a down payment gift and, according to the National Association of REALTORS, down payment gifts in some form are used by close to a quarter of all home buyers aged 37 and younger.

Buyers report getting cash gifts for a down payment from a variety of sources:

  • Parents
  • Grandparents
  • Fiancé / Fiancée
  • Friends
  • Employers

Gifts aren’t just for first-time home buyers, either.

Any home buyer can receive a cash gift for down payment; and, it doesn’t matter whether your credit rating is high or low — if you’re buying a house, you can use cash gifts to help you reach your goal.

The most important part — and this is important! — is that whatever cash gift you might get, they have to be documented property.

Documenting a cash gift for down payment means showing proof of the gift moving from the gifter’s bank account into your bank account via receipts; and, your signature on a letter that states that the gift is actually a gift (and not a loan in disguise).

Mortgage lenders allow cash gifts in all sizes, from a few hundred dollars to a few hundred thousand dollars, but they have to be documented.

You’ll also want to receive the gift at least 30 days prior to your purchase, if possible, to allow your lender to perform extra due diligence.

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