The Five Most Common Questions About a Down Payment Gift

 For many home buyers, it’s common to receive a monetary gift to be used for part, or all, of a down payment.Saving for a down payment is the first step in the homebuying process. But with rent prices increasing across the country, student debt reaching all-time highs and any number of other expenses that come up in everyday life, saving can be difficult. For many home buyers, it’s common to receive a monetary gift to be used for part, or all, of a down payment. But, there are some things that you need to know. Before you give or accept a down payment gift, here are the five of the most common questions homebuyers have about gift down payments.

1. Who Can Gift a Down Payment?

It’s important to note that you cannot receive a down payment gift from just anyone. The donor needs to be a close family member, like a parent, grandparent, child or sibling. If the donor is a significant other, domestic partner or fiancé, documentation is typically required that shows both parties will be living at the residence.

2. What Loan Programs Can Down Payment Gifts Cover?

Down payment gifts cover a variety of loan programs, such as Conventional, FHA and VA loans. Gifts can also cover closing costs for USDA loans, giving the borrower a variety of options. Visit our website for more information on the loan types we offer.

3. What is a Down Payment Gift Letter?

A gift letter is a document that is usually required to let the mortgage lender know that the money being given is a gift and not a loan. Depending on your lender, gift letter requirements may vary. Typically the letter should state the following:

  • The amount and date of the gift
  • The relationship between the two parties
  • The address of the purchased property

Other documentation that may be required can include the source of the funds, such as bank account statements and a copy of the check or wire transfer.

4. How Will it Affect a Donor’s Taxes?

According to the IRS, a person can give up to $14,000 as a gift to any one person without paying a gift tax. If a married couple files a joint tax return, they could then give up to $28,000 without paying a tax. Any person or married couple that gives a gift that surpasses that amount will be subject to paying a gift tax. For more information on gift taxes, visit the frequently asked questions page about gift taxes at, or speak to a certified tax advisor.

5. How Can I Receive More Information?

Colonial offers an assortment of loan types and programs that support a variety of down payment options. Contact us to speak with one of our skilled professionals, or click here to start an application with one of our knowledgeable loan officers to see what your options may include.


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