A family member is helping with my down payment. Why all the paperwork?

Quick answers

Open a question. Read the answer right here.

First, is it a gift or a loan?

If the money needs to be paid back, we need to say that. A gift letter cannot turn a repayment agreement into a gift.

For an eligible gift, the lender will usually want information about the donor, the relationship, the amount and the fact that repayment is not expected. It also needs the required evidence of the funds and transfer.

Who can give a gift and how it can be used depend on the program. A gift that works for one home purchase may not work for an investment-property loan.

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Illustrative image of parents embracing their adult daughter — Illustrative image. Not a photo of the people discussed.

A deposit in one of our files needed more information. The family was helping with the purchase, and the team needed donor details and confirmation that the money was a gift.

I understand why that can feel repetitive. The money is already there. Why keep asking about it?

Because having money in the account and showing where it came from are two different parts of the loan review.

First, is it a gift or a loan?

If the money needs to be paid back, we need to say that. A gift letter cannot turn a repayment agreement into a gift.

Who can give a gift and how it can be used depend on the program. A gift that works for one home purchase may not work for an investment-property loan.

Ask before moving the money

This is much easier when we plan the transfer first.

Tell the team who is helping and how much they plan to give.
Ask what the loan program requires.
Follow the instructions for sending the funds.
Keep the complete transfer records.
Let the team know if the amount or source changes.

Moving money through several accounts can create more questions than sending it along the agreed path.

Keep your own cash in the picture

I also want to separate the family's gift from the money you are contributing yourself.

How much goes to closing? How much needs to stay in reserve? What will you have left for moving and the first few months in the home?

The goal is to make the family's help easy to document and useful to you. A short conversation before the transfer can save a lot of last-minute scrambling.

This example is based on a real mortgage discussion with identifying information removed. Any numbers are illustrative and are not current loan terms or a commitment to lend. Loan programs, rates, property values and borrower qualification vary.

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