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Using Gifted and/or Inherited Money for a Down Payment on a Home

Buying a home is a big financial milestone, and for many people a down payment is the biggest hurdle. If you’ve recently received a financial gift from a family member or inherited money from a loved one, you may wonder if those funds can help you purchase a home.

The good news is that, yes, you can usually use gifted or inherited money toward a down payment. In fact, roughly 38% of first-time homebuyers under age 30 relied on either a cash gift or inheritance from a family member to afford a down payment.1 But you may need to navigate some lender requirements before moving forward.


Can You Use Gifted or Inherited Money for a Down Payment?

Most lenders will accept gifted or inherited money as part of your down payment. But depending on the loan type and the lender, there may be some extra red tape or limitations.

Loan underwriters usually need to document where the money came from and confirm that you don’t have to repay it. In other words, they want proof it’s not a loan disguised as a gift because a loan could impact your ability to make monthly mortgage payments.2

Also, some lenders or first-time homebuyer programs may require that a certain percentage of the down payment — often 3% to 10% — comes from your own “seasoned” funds. That means money you’ve had in your account for a set period of time (often 60 to 90 days but could be as much as a year).

If you want to use gifted or inherited money for a down payment and find your lender's specific limitations to be too onerous, don't be afraid to talk with a different lender. Some will not limit your use of gifted or inherited funds for the down payment — or will have less stringent requirements.


Paperwork Requirements for Gifted Funds

If you're using gifted money, your lender will likely require:

  • A gift letter from the person giving you the money, confirming that the funds are a gift, not a loan you’ll have to repay.3 Mortgage lenders usually have their own version of a gift letter template, so check with your loan officer before drafting your own.4
  • Documentation showing the transfer of funds, such as bank statements showing the money leaving the donor’s account and being deposited into yours, or a wire transfer confirmation.5

When you receive a large gift, you might wonder whether you need to pay taxes on it. Fortunately, gift taxes are not your concern as the recipient. The responsibility falls on the person giving the gift, but only if the gift is greater than the annual gift tax exemption limit.

For 2025, the IRS allows each individual to gift up to $19,000 per recipient per year without triggering gift tax reporting requirements.6

For example, say you’re married and your parents want to help with a down payment. Both parents could give you and your spouse up to $76,000 without filing a gift tax return. That’s $19,000 from each parent for you and $19,000 from each parent for your spouse.

If a parent or grandparent gifts you more than that, they must file Form 709 to report the gift to the IRS.7 However, it doesn’t mean they’ll owe tax. Any gifts over and above the annual exclusion amount reduce their lifetime gift and estate tax exemption (the amount they can leave heirs without facing federal estate taxes). For 2025, the lifetime gift and estate tax exemption is $13.99 million per individual ($27.98 million for a married couple), so very few people have to worry about hitting this limit.6


What About Inherited Money?

Most (though not all) lenders will accept inherited money for some or all of the minimum down payment. And some may require a seasoning period of a length they choose.

No matter what the bank's rules are, you may still need to provide documentation showing where the money came from, such as:

  • A copy of the will or trust showing you were the beneficiary, or a letter from the executor
  • Proof of the distribution (bank statement, check copy, or legal letter from the estate)
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To use gifted or inherited funds for a down payment, you need to provide documentation such as a gift letter, bank statement, or a copy of the will.

You may also need to receive the inherited funds before the closing date.8


Loan Options When Using Gifted or Inherited Money

Most home loan types allow you to use gifted or inherited money for a down payment, as long as you follow documentation requirements. Here are a few to consider.


Conventional Loans

Conventional loans may have down payment requirements as low as 3%, although you generally have to pay private mortgage insurance (PMI) with a down payment of less than 20%.

Conventional loans that conform to guidelines set by the Federal National Mortgage Association (Fannie Mae) allow gift funds from relatives and other people who share a “familial relationship” with the borrower, such as a godparent, domestic partner, or fiancé.9


FHA Loans

These loans require as little as 3.5% down, and you can use gifted or inherited money to cover your entire down payment and closing costs.10

Many people mistakenly believe they have to be low-income to qualify for an FHA loan, but anyone can use the FHA loan program. You just have to work with a bank that is approved to issue FHA loans. You can find an FHA-approved lender using HUD’s Lender Search Tool.11


VA Loans

For eligible veterans, active-duty service members, and surviving spouses, VA loans require no down payment, and gift funds are allowed, as long as the gift isn’t from someone affiliated with the sale, such as a builder, developer, or real estate agent.12

For example, you can use these funds to cover closing costs, pay discount points in exchange for a lower interest rate on your loan, make an optional down payment, or create a cash reserve, which can help you qualify for a mortgage.13


USDA Loans

USDA loans are available to homebuyers in rural areas. These loans also require no down payment, so you can use a gift or inheritance to cover closing costs, purchase discount points, or make an optional down payment. 14


Don’t Let Red Tape Stop Your Homeownership Dreams

Keep in mind, some lenders and first-time buyer programs have internal rules that are stricter than the general guidelines outlined above. For example, a first-time homebuyer program may require at least 10% of the down payment comes from your savings. Or a bank offering conventional loans may refuse recently gifted funds unless they’ve been seasoned for 90 days or more.

If you run into roadblocks, it’s not necessarily a deal-breaker. Look for a different lender or loan program that’s more accommodating. Many lenders allow gifted or inherited funds for down payments, but documentation is crucial — and so is choosing the right lender.

Important disclosure information

Asset allocation and diversifications do not ensure against loss. This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. Chris Clow, “Nearly 40% of homebuyers under 30 relied on cash gift or inheritance from family for a down payment,” Housingwire, published September 6, 2023. Accessed April 30, 2025. Back
  2. Emily Starbuck Gerson, “Rules for Giving and Receiving Home Down Payment Gifts,” Experian, published August 19, 2023. Accessed April 30, 2025. Back
  3. Alexis Benveniste, “What to Know if You’re Using Gift Money for a Down Payment,” Zillow, published June 18, 2024. Accessed April 29, 2025. Back
  4. Alycia Lucio, “Gift Letter for a Mortgage,” Zillow, published October 11, 2024. Accessed April 16, 2025. Back
  5. Freddie Mac, "The Single Seller Servicer Guide," updated April 2, 2025. Accessed April 30, 2025. Back
  6. IRS.gov, “IRS releases tax inflation adjustments for tax year 2025,” updated October 23, 2025. Accessed April 29, 2025. Back
  7. IRS.gov, “Frequently asked questions on gift taxes,” updated October 29, 2024. Accessed April 29, 2025. Back
  8. FHA.com, “Where Your Down Payment May Come From,” published October 28, 2023. Accessed April 30, 2025. Back
  9. Fannie Mae, “Originating & Underwriting Selling Guide,” updated September 9, 2023. Accessed April 29, 2025. Back
  10. Arturo Conde, “How Much Money Can Be Gifted for a Down Payment?," issued November 15, 2024. Accessed May 9, 2025. Back
  11. HUD.gov, “HUD Lender List Search” accessed April 30, 2025. Back
  12. VA.gov, “VA Lender’s Handbook,” updated February 22, 2019. Accessed April 30, 2025. Back
  13. Fannie Mae, “Tips on Building Your Cash Reserves,” accessed April 30, 2025. Back
  14. USDA.gov, “HB-1-3555 SFH Guaranteed Loan Program Technical Handbook,” revised May 6, 2024. Accessed April 29, 2025. Back