Gifting Money for Home Purchase
By: Financial Hotline
Spring 2026 (Vol. 44, No. 1)
Q: My husband and | plan to give our married children money to buy a house. Can they still qualify for a mortgage if | provide most of the down payment?
A: Yes, you can gift money to your kids for a house down payment (or closing costs) even if they're getting a mortgage. Lenders generally allow it for primary residences, and the process is straightforward if handled properly. Here's what you need to know about timing, method, documentation, and tax rules in 2026.
The annual gift tax exclusion is $19.000 per recipient in 2026 (or $38,000 if you and your spouse split the gift). You can give this amount to each child without filing any gift tax paperwork or reducing your lifetime exemption. For example, you and your spouse could give your child $38,000 and their spouse $38,000 for a total of $76,000 without triggering any gift tax.
Gifts above these limits require you (the donor) to file IRS Form 709 (gift tax return) by April 15 of the following year. This isn't filed with your 1040 but it's easy to comply. It's a simple form to complete and you just mail to the address listed. Most people filing form 709 don't owe gift tax, because the lifetime gift and estate tax exemption is about $15 million per person in 2026. This form just keeps track of how much you give away in case you hit that larger limit. The recipient of the gift has no IRS reporting requirements. If the gift is large and you don't want the extra reporting burden, consider spreading it over multiple years (e.g., $19.000 per year per parent, per recipient) to stay under the annual exclusion.
When a mortgage is involved, the timing can be important. It's a good idea to discuss the exact timeline with your kids' loan officer early. They know their specific lender program rules and will be able to guide you.
Most lenders review the last 2-3 months of bank statements during underwriting to verify funds and ensure no undisclosed loans. Large recent deposits can raise questions.
The best option for simplicity is to transfer the money well in advance (ideally 60+ days before loan application) so it becomes 'seasoned' funds in your kids account. Another common and lender-friendly option is to wait until after mortgage approval but before closing, and wire the funds directly to the title company or closing agent. This avoids seasoning issues and makes documentation cleaner. Many lenders prefer or require this for larger gifts.
Avoid depositing a large gift into their personal account right before or during underwriting without lender coordination, this could delay the process or require extra explanations.
Lenders want proof the money is a true gift (no repayment expected) and not a hidden loan, which could affect debt-to-income ratios.
The lender will almost always require a Gift Letter. They will typically provide their own approved template for you to fill out if you ask. This is simply a signed letter from you stating:
- Your name, address, phone, and relationship to the recipient(s).
- Exact gift amount and date (or intended date).
- That it's a gift with no expectation of repayment.
- Source of your funds (e.g., from your savings or investment account).
You may also be asked to provide proof of the transfer and where it originated from. Examples include:
- Bank statement or wire confirmation showing the money leaving your account.
- Proof it arrived in their account or directly at closing (e.g., wire receipt, deposit slip).
- Sometimes your bank statements, to show you had the funds available.
Most conventional loans allow family gifts for all or part of the down payment (sometimes with a small borrower contribution requirement). FHA loans are very flexible with gifts from relatives. Gifts are typically fine for primary residences but rules may be stricter for investment properties.
Your best strategy is to coordinate with everyone. Talk to your kids and their loan officer first. Confirm the lender's exact requirements for gift letters, seasoning, and wiring instructions. Then keep good records. Save all paperwork for transfer confirmations, statements, and letters for your taxes and their mortgage file.