Mortgage Gift Letter: Rules, Template & What Lenders Require

A gift letter is short, but it has to include a specific set of facts, and it must be signed by the donor — the person giving the money. Fannie Mae's Selling Guide requires the gift letter to specify the dollar amount of the gift, the donor's statement that no repayment is expected, and the donor's name, address, telephone number, and relationship to the borrower. Most lenders also want the address of the property the loan is for. The phrase that does the real work is the one stating the funds are a gift with no repayment expected — that is what distinguishes a gift from a loan.

• The dollar amount of the gift (Fannie Mae allows the actual or maximum amount).
• The donor's name, address, and telephone number.
• The donor's relationship to you (for example, parent, grandparent, sibling).
• A clear statement that no repayment is expected.
• The address of the property being purchased (most lenders require this).
• The donor's signature, and often the date of the transfer.

Every major loan program limits who may give gift funds, and the common thread is that the donor cannot have a financial interest in the sale. A party to the transaction — the seller, builder, developer, or real estate agent — generally cannot be the donor, because that would effectively be an incentive disguised as a gift.

Conventional loans follow Fannie Mae and Freddie Mac rules. Fannie Mae's Selling Guide allows gifts for a principal residence or second home from a relative — defined as the borrower's spouse, child, or other dependent, or anyone related by blood, marriage, adoption, or legal guardianship — and from certain non-relatives with a documented familial relationship, such as a domestic partner, fiancé(e), former relative, or someone with a long-standing relationship. FHA loans, governed by HUD Handbook 4000.1, accept gifts from family members, an employer or labor union, a close friend with a clearly defined and documented interest in the borrower, a charitable organization, or a government agency. VA and USDA loans likewise accept gifts from donors who are not parties to the sale.

• Conventional (Fannie Mae / Freddie Mac) — relatives, plus defined non-relatives with a documented familial relationship; not a party to the sale.
• FHA (HUD 4000.1) — family members, employer/labor union, a documented close friend, a charity, or a government agency.
• VA / USDA — gifts allowed from donors who are not interested parties to the transaction.
• Prohibited across programs — the seller, builder, developer, real estate agent, or anyone with a financial stake in the sale.

The gift letter alone is rarely enough. Lenders also want to see the money actually move as described — an unbroken paper trail from the donor's account into yours (or to the closing agent). Fannie Mae's Selling Guide lists acceptable documentation, including a copy of the donor's check together with your deposit slip, a copy of the donor's withdrawal slip with your deposit slip, evidence of an electronic transfer from the donor to you or the closing agent, or the donor's check to the closing agent shown on the settlement statement. The point is to tie the donor's withdrawal to your matching deposit.

Keep the amounts and dates aligned to the penny. If the gift letter says $15,000, the donor's withdrawal and your deposit should both show $15,000 on dates that match the letter. Underwriters flag deposits they cannot source, so a clean, consistent trail is what moves the file. For larger or partial down payments, there can also be a minimum-contribution rule — on some higher loan-to-value conventional loans for two-to-four-unit or second homes, the borrower must contribute a percentage from their own funds — so confirm whether any of your own money is required.

"Seasoning" refers to how long funds have sat in your account. The practical rule is that well-documented gift funds usually do not need to be seasoned: if you can fully trace the transfer with the donor's withdrawal and your matching deposit and a proper gift letter, lenders can generally accept a recent transfer. Funds that have been in your account for a long time may not even be questioned, while a recent deposit is exactly what triggers the request for documentation.

Because lender overlays vary, some will still ask for additional explanation on a very recent deposit, and timing can matter for whether a deposit even needs sourcing. The safest approach is to document the gift fully regardless of timing: a signed gift letter plus the records tracing the money. A complete paper trail removes the seasoning question entirely, because the lender can see exactly where the money came from.

The errors that hold up closings are almost always about traceability and the nature of the gift. Cash is the classic problem: a cash deposit cannot be tied to a documented withdrawal from a donor's account, so underwriters cannot source it. Round-number deposits that appear from nowhere draw the same scrutiny. And the most serious mistake is papering over a loan as a gift — if the money is actually expected to be repaid, calling it a gift misstates a material fact on a mortgage application.

Avoid these by planning the transfer with documentation in mind. Have the donor move the money by check or traceable electronic transfer, not cash, and keep the gift letter, the donor's withdrawal record, and your deposit record consistent. Confirm the donor is acceptable for your program before the funds move, and ask your lender exactly what it needs — getting the gift right on the first try is far faster than unwinding a deposit the underwriter cannot accept.

• Cash gifts — cannot be sourced to a documented donor withdrawal; avoid them.
• Unsourced round-number deposits — flagged by underwriters until traced.
• Treating a loan as a gift — repayable money is not a gift; misstating it is a material misrepresentation.
• Using a prohibited donor — a party to the sale (seller, agent, builder) cannot be the donor.
• Inconsistent amounts or dates between the letter and the bank records.

Prepare the gift letter and the supporting bank records together, because the lender wants to see both the statement and the money moving as described. Have the donor sign it, use the property address the loan is for, and keep the amount and dates consistent with the statements you will provide. Gather the facts the letter needs — the donor's contact details and relationship, the exact amount, and the transfer date — before you draft it.

When you need a clean, complete document, you can generate a mortgage gift letter with the donor and gift details laid out the way underwriters expect, then pair it with the records that trace the transfer. Confirm your loan program's donor rules and any minimum-contribution requirement with your lender first, and keep copies of everything. This guide explains the general requirements; for your specific situation, follow your lender's and a qualified professional's guidance.

A mortgage gift letter turns a down-payment deposit into documented, acceptable funds. It must state the gift amount, the donor's name, address, phone, and relationship to you, and — critically — that no repayment is expected, signed by the donor. Make sure the donor is acceptable for your loan program (conventional under Fannie Mae, FHA under HUD 4000.1, VA, or USDA) and is not a party to the sale, then back the letter with records that trace the donor's withdrawal to your matching deposit. Avoid cash, never disguise a loan as a gift, and confirm the specifics with your lender before the money moves.