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What You Need to Know About Using a Gift as a Down Payment

Down Payment GiftSaving up for a down payment on a home can be challenging. Often times buyers will rely on a relative to assist by gifting a sum of money to go towards the down payment. If you choose to use the gift, be aware of the specific requirements from your lender.

Rivermark requires that the gift comes from one of these sources:

  • A relative, defined as the borrower’s spouse, child, or other dependent, or by any other individual who is related to the borrower by blood, marriage, adoption or legal guardianship; or
  • A fiancé, fiancée or domestic partner.

Additionally, there are specific asks your mortgage officer will have during the closing process. 

For example, you’ll likely need to provide gift letter that includes the following information:

  • The amount of the gift
  • The date the funds were gifted
  • The relationship of the gifter to the giftee
  • A note that the gift is actually a gift and not a loan and will not be repaid

Next, you’ll be asked to verify that the donor has sufficient funds to cover the gift. Required documentation may include:

  • A copy of the donor’s check and the borrower’s deposit slip,
  • A copy of the donor’s withdrawal slip and the borrower’s deposit slip,
  • A copy of the donor’s check to the closing agent, or
  • A settlement statement showing receipt of the donor’s check.

There may be minimum contribution requirements from the borrower’s own funds, depending on the type of residence. Here's what you need to know:

LTV, CLTV, or HCLTV Ratio Residence Type Minimum Borrower Contribution 
80% or less One to four unit principal residence A minimum borrower contribution from the borrower’s own funds is not required. All funds needed to complete the transaction can come from a gift. 
80% or less Second home  A minimum borrower contribution from the borrower’s own funds is not required. All funds needed to complete the transaction can come from a gift. 
Greater than 80% Two to four unit principal residence  The borrower must make a 5% minimum borrower contribution from his or her own funds. After the minimum borrower contribution has been met, gifts can be used to supplement the down payment, closing costs, and reserves. 


Some additional things to note about accepting a gift for a down payment:

  • The dwelling must be owner occupied and cannot be made on investment properties.
  • The gift can generally never come from a real estate agent, builder or the seller of the home.
  • There are likely tax implications on accepting the gift. Make sure to consult your tax professional for full details. 

For more information, one of our mortgage experts would be happy to assist you. Please give us a call at 800.452.8502, ext. 497.