Make the Holiday Bright by Gifting a Down Payment on a New Home

Posted: 12/7/2021 | Read Time: 2min

‘Tis the season for giving. While presents come in all shapes and sizes, helping a family member or friend, in certain circumstances, buy a new home is perhaps the most extraordinary gift of all.

If you work with the right lender, finding an affordable home mortgage is possible. However, making that down payment can be challenging. The good news is that family, a friend, an employer and even charitable organizations can gift a down payment. According to a report by the National Association of REALTORS, 28 percent of younger millennials (22 to 30 years old) did use a gift or a loan from a friend or relative to purchase a home in 2021.

Whether you are the one giving or receiving, there are specific rules and regulations that need to be followed.

3 Things to Know Before Giving or Accepting a Down Payment as a Gift

  1. It must be a gift. In other words, there can’t be any financial strings attached and written proof must be provided.
  • The gift-giver must provide a letter that explicitly states that the gift isn’t a loan.
  • A copy of the gift giver’s bank account statement showing the funds and canceled check are required.
  1. Gift givers must be closely connected to the recipients. If you are getting a conventional loan, restrictions regarding who can give the gift are more limited than if you received a loan from the FHA. It’s also very clear that the seller, real estate agent or broker or builder cannot gift a down payment to the home buyer.
  • Who can give a down payment gift for a conventional loan?
    • Parents, grandparents, siblings and spouse
    • Domestic partners, engaged couples and future in-laws
  • What if it’s an FHA loan?
    • The borrower’s relative
    • The borrower’s employer or labor union
    • A close friend with a clearly defined and documented interest in the borrower
    • A charitable organization
    • A governmental agency or public entity that has a program providing home ownership assistance to low- and moderate-income families, or first-time homebuyers
  1. There are tax implications.
  • Make sure to reach out to a tax advisor for help on your specific situation.
  • If you are the gift recipient, you don’t need to report the down payment gift to the IRS.
  • Gift givers can only give $15,000 tax-free. (This amount is increasing to $16,000 in 2022.) If parents are gifting the down payment, they can each gift $15,000. If the gift exceeds $15,000, the gift giver must file Form 709 (gift tax return) on the gift giver’s estate upon death.

There is no doubt that giving or receiving help with a down payment on a new home is a gift that keeps giving long after the holiday season is behind us.

It’s a big decision and before making it, it’s best to reach out to a lender for more detailed guidelines. Contact a Wyndham Capital Mortgage Mortgage Consultant today.


Matthew Harris is the Internal Communications Manager at Wyndham Capital Mortgage. With over 11 years of experience writing and creating content about topics from sports and culture to financial systems and business, Matthew brings his expertise to the mortgage industry. Matthew oversees Wyndham’s internal communication and content strategies to help drive the internal messaging and creating content that gives both employees and borrowers relevant and reliable information to help them make informed homebuying, selling and refinancing decisions. Matthew has a Master’s Degree in Communications from Purdue University and a Bachelor's Degree in Journalism from Appalachian State University. His interests include social media marketing, content creation and catching the occasional sports game.

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