Conventional loans

Using gift funds on a conventional loan

Family money can cover some or all of a conventional down payment, but the lender has to trace it from the donor's account to yours. Knowing Fannie Mae's rules before the money moves saves a scramble for statements later.

Reviewed November 2026 · Written for Buy Home Tips from the sources listed below

A gift from family is one of the most common ways first-time buyers close the gap on a down payment. On a conventional loan, the lender usually follows the rules of Fannie Mae or Freddie Mac, the companies that buy most conventional mortgages. This guide follows Fannie Mae's Selling Guide, section B3-4.3-04. Freddie Mac's rules are similar but not identical, and lenders may add their own requirements.

Your own funds required with a gift, Fannie Mae. Minimum borrower contribution by property type when the loan-to-value is above 80%, from Selling Guide B3-4.3-04

What a gift can pay for

Fannie Mae allows personal gifts on loans for a principal residence or a second home. A gift can pay all or part of the down payment, closing costs or reserves, subject to the minimum contribution rules below. Gifts are not allowed on an investment property.

Who can give

The Selling Guide lists two groups of acceptable donors:

Relatives. Your spouse, child or other dependent, or anyone related to you by blood, marriage, adoption or legal guardianship.

Non-relatives with a familial relationship. A domestic partner or a relative of a domestic partner, a person engaged to marry you, a former relative, or someone with a long-standing familial-like or mentorship relationship with you.

The donor cannot be the builder, the developer, the real estate agent or anyone else with an interest in the sale, or affiliated with them. A seller who is also a relative and not tied to another interested party can give a gift, and a gift of equity from a family seller is handled under a separate section.

When you need your own money

The minimum borrower contribution depends on the loan-to-value and the property:

Loan-to-value	Property	Your own funds required
80% or less	One- to four-unit principal residence or second home	None
Above 80%	One-unit principal residence	None
Above 80%	Two- to four-unit principal residence	5%
Above 80%	Second home	5%

So a first-time buyer purchasing a single-family home or condo to live in can, under Fannie Mae's rules, cover the whole down payment and closing costs with a gift. Once a required 5 percent contribution is met, gifts can supplement the rest. HomeReady loans have their own contribution rules.

The gift letter

Fannie Mae requires a gift letter signed by the donor. It must:

give the actual dollar amount of the gift, or the maximum amount
state that no repayment is expected
include the donor's name, address, phone number and relationship to you

If the gift comes from a trust or an estate set up by an acceptable donor, the letter must name the trust or estate account. If the amount you actually receive differs from what was used in underwriting, the lender may need to rerun the file.

A special rule applies when a gift is pooled with your own funds to meet a minimum cash down payment. The donor must certify that they have lived with you for the past 12 months and will live with you in the new home, and the lender needs documents showing the shared address.

Proving the money

The Selling Guide requires the lender to verify that the gift money is in the donor's account or has already reached yours. The documentation it lists includes:

a copy of the donor's check and your deposit slip
the donor's withdrawal slip and your deposit slip
proof of an electronic transfer from the donor's account to yours or to the closing agent
a copy of the donor's check to the closing agent
a settlement statement showing the closing agent received the donor's check

If the money is not transferred before settlement, the donor must give it to the closing agent by electronic transfer, certified check, cashier's check or another official check.

Your lender will tell you which it prefers. Ask before the money moves, because redoing a transfer is harder than doing it right once.

Worked example: a parent's gift on a first home

Sam is buying a $280,000 condo as his home with 5 percent down, so his loan-to-value is 95 percent. His aunt offers $14,000 for the down payment.

Because it is a one-unit principal residence, Fannie Mae's rules do not require Sam to contribute his own money first, even above 80 percent loan-to-value. His aunt is a relative, so she is an acceptable donor.

She signs a gift letter stating $14,000, that no repayment is expected and her contact details and relationship. She wires the money directly to the title company two weeks before closing and keeps the bank confirmation. The lender gets her statement showing the balance before the wire and the title company's receipt. If Sam were buying a second home instead, he would need $14,000, the full 5 percent, from his own funds.

Mistakes that slow approval

Cash gifts. Cash handed over in person is hard to trace. Use checks or wires.

Unexplained deposits around the gift. Your lender reviews your statements and may ask about any large deposit. A clear paper trail for the gift does not cover other unexplained money.

A loan disguised as a gift. The letter says no repayment is expected. If there is a repayment plan, it is a debt, and treating it as a gift misrepresents your file.

Gifts from the wrong person. A friend with no familial or mentorship relationship, or anyone tied to the sale, does not qualify under Fannie Mae's list.

The bottom line

On a Fannie Mae conventional loan for a one-unit home you will live in, a gift from an acceptable donor can cover the entire down payment and closing costs. Second homes and two- to four-unit homes need 5 percent of your own money above 80 percent loan-to-value. Get a complete gift letter, keep the donor's and your statements, and move the money by check or wire.

Before the gift moves

Confirm the donor is an acceptable donor under the loan's rules.
Ask the lender how it wants the transfer documented.
Have the donor sign a gift letter with the amount and a no-repayment statement.
Keep the donor's statement showing the money before it leaves.
Keep your statement showing the deposit, or the closing agent's receipt.
Do not mix gift money with cash from sources you cannot document.

Questions buyers ask

Can a gift pay my whole down payment on a conventional loan?

On a one-unit principal residence with Fannie Mae, yes. Its Selling Guide does not require a minimum contribution from your own funds for that property type, at any loan-to-value. Two- to four-unit homes and second homes need 5 percent of your own money when the LTV is above 80 percent.

Who can give me money for a conventional loan?

Fannie Mae allows gifts from relatives by blood, marriage, adoption or legal guardianship, and from certain non-relatives with a familial relationship, such as a domestic partner, a fiancé or fiancée, a former relative or someone with a long-standing familial or mentorship relationship. Anyone connected to the sale, such as the builder or agent, cannot give.

What does a gift letter need to say?

Under Fannie Mae's rules, it must state the actual or maximum amount, say that no repayment is expected and give the donor's name, address, phone number and relationship to you. The donor signs it.

Can gift funds count toward reserves?

Yes, under Fannie Mae's rules, eligible gift funds can satisfy reserve requirements. A gift of equity cannot.

Sources checked for this page

Checked November 2026. Programs and limits change; confirm with the source before you rely on a figure.