Family help with a down payment is common, permitted on most programs, and almost never a problem if the documentation is handled correctly from the start. It becomes a problem when money moves first and paperwork is attempted afterward.
Here is what a lender needs and why.
Why lenders care about where the money came from
Two reasons.
It must not be a loan. If the money has to be repaid, it is a debt, and a debt belongs in your debt-to-income ratio. Undisclosed repayment obligations are exactly what the sourcing requirement exists to find.
It must not come from an interested party. The seller, the builder, the agent or anyone with an interest in the transaction cannot gift a buyer their down payment. Interested parties may contribute toward closing costs within the concession limits, which is a different thing with a different cap.
Who may give a gift
Program rules vary and the details matter, so confirm against your specific program. In general terms:
Family members are the standard case, with the definition of family being broader than people assume on many programs.
Fiancés, domestic partners and in some cases a close friend with a documented relationship are accepted on certain programs. The requirements get stricter as the relationship gets more distant.
Employers, charitable organizations and down payment assistance programs may be sources with their own specific rules.
Not permitted: anyone with an interest in the sale. The seller, the listing agent, the builder, the buyer's agent in the capacity of an interested party.
Occupancy matters too. Gift fund rules are most permissive on a primary residence, and more restrictive on a second home or investment property, where some programs limit or prohibit gifts entirely and require the borrower's own funds.
What the documentation looks like
A gift letter, signed by the donor, stating:
- The donor's name, address and phone number
- The relationship to the borrower
- The dollar amount
- The property address
- An explicit statement that no repayment is expected or required
That last line is the point of the document. Everything else is identification.
Evidence the donor had the money. A bank statement showing the funds in the donor's account before the transfer. This is where some donors balk, and it is not optional on most programs. A donor who will not provide a statement has effectively declined to make a documentable gift.
Evidence the money transferred. A wire confirmation, a canceled check with the deposit record, or matching withdrawal and deposit statements. The amounts must match.
Evidence it arrived. Your bank statement showing the deposit, with the amount matching the letter and the withdrawal.
The underwriter is building a chain: donor had it, donor sent it, borrower received it, and nobody owes anybody anything.
The three mistakes that cause real problems
1. Cash. A cash deposit cannot be sourced. There is no document showing where cash came from, which means on most programs it cannot be used, full stop. A relative who hands you an envelope has given you money you may not be able to use for this purchase. Wire or check, always.
2. Commingling. The gift gets deposited into an account that already has activity, then money moves between accounts twice, and now the underwriter is reconstructing a trail across three statements. Keep it clean: deposit the gift into the account you will use for closing, in one transaction, with nothing else happening around it.
3. Timing it badly. A gift deposited a week before closing creates a document request at the worst possible moment. A gift deposited before you apply, with the statements already showing it seasoned in your account, is substantially simpler. Earlier is better, always.
Related: do not have the donor wire funds directly to escrow without telling your lender first. It can be acceptable and it has to be coordinated, because a wire arriving at escrow that the lender has not documented is a condition, not a convenience.
Large deposits generally
Gift funds are one instance of a broader rule: any large or unusual deposit in your statements will be questioned. Not as an accusation, as a requirement. The underwriter needs to know it is not borrowed and not from an interested party.
A bonus, a tax refund, proceeds from selling a car, a transfer from your own brokerage account: all fine, all need a document. Keep the receipts. See Large Deposits and NSF Items.
If you are self-employed, add one more layer: moving money out of a business account into a personal account is a sourcing question and potentially a tax question. Talk to your CPA before you do it, not after. See Self-Employed Jumbo Loans.
Gifts and reserves
A point that catches people out. Some programs allow gift funds for the down payment but have different treatment for reserves, the liquid assets you must still hold after closing.
Which means a buyer whose entire cash position is a gift may clear the down payment requirement and fail the reserve requirement. On a jumbo or non-QM file, where reserves are a hard requirement, that is a declined loan.
Ask explicitly: can gift funds satisfy my reserve requirement on this program? Get the answer before you plan around it.
Gift of equity
A separate structure worth knowing about: when a family member sells you a property for less than its appraised value, the difference can function as a gift of equity, serving as some or all of your down payment with no cash changing hands.
This has its own documentation requirements, needs an appraisal establishing real value, and has tax implications for the seller that a tax advisor should address. It is a genuinely useful structure in family transactions and it is not a do-it-yourself project.
The clean sequence
- Tell your lender the gift is coming before it moves.
- Confirm the donor is an acceptable source for your program and occupancy.
- Get the gift letter signed before the transfer.
- Get the donor's bank statement showing the funds.
- Transfer by wire or check, never cash, in one clean transaction.
- Deposit it into the account you will close from and leave it alone.
- Keep every document.
- Confirm whether it can also count toward reserves.
- If you are self-employed and the money is coming out of a business entity, call your CPA first.
Why bring this file to us
- We read the documents ourselves, rather than handing them to a processor and waiting.
- Broker model. An unusual file needs multiple investors, not one bank's shelf.
- The full toolkit, agency and jumbo through bank statement, asset depletion, DSCR and no-ratio non-QM.
- You talk to the principal. Ricky Khamis is President of EPiQ Lending, NMLS #173141, lending in Arizona since 1999 and a 2025 Presidents Club Winner at CMG Home Loans. Direct line: (480) 999-9842.
EPiQ Lending is NMLS #1936984, at 7975 N. Hayden Road, Suite A-101 in Scottsdale. Verify all of it before you trust any of it: Ricky's EPiQ Lending profile, the Scottsdale branch, and the license itself at NMLS Consumer Access. Hold every lender to that standard, including us.
Send me the file before you write an offer, and I will tell you what it actually supports.
Equal Housing Opportunity. This is general information, not a commitment to lend or an offer to extend credit. Program guidelines, eligibility requirements and documentation standards vary by investor and change over time. Rates, terms and program guidelines change and depend on credit approval, property appraisal and other qualifying factors. Not all applicants will qualify. Non-QM financing carries different pricing and terms than agency financing. Consult your tax advisor regarding your own situation.
Looking at a specific home? Send me the address and I will run the numbers: rickykhamis.com/analyze
