Family money can buy a home. It needs a paper trail.

The full guide

Down payment gift rules: the documents a family gift needs for a Chicago mortgage.

Lots of buyers get help from parents or grandparents, and most loans allow it. The paperwork is what slows people down, and it's simple once you know what the underwriter is looking for.

Why lenders care where the money came from

An underwriter has two questions about your down payment. Is it yours to spend, and do you owe anyone for it? A loan from your uncle is a debt, even a friendly one, and debts count against what you can borrow. A gift doesn't. The documents below are how you show the money is a gift.

Who can give you money

For a conventional loan sold to Fannie Mae, a gift can come from a relative, which Fannie Mae defines as your spouse, child or other dependent, or anyone related to you by blood, marriage, adoption or legal guardianship. It can also come from a domestic partner, a fiancé or fiancée, a former relative, or someone with a long, family-like or mentoring relationship with you. The giver can't be tied to the builder, the developer or the real estate agent. Source: Fannie Mae Selling Guide B3-4.3-04, Personal Gifts.

FHA's list is a little different. It includes a family member, your employer or labor union, a close friend with a clearly defined and documented interest in you, a charity, and a government agency or public entity with a homebuyer assistance program. FHA also says cash on hand is not an acceptable source for the giver's funds. Source: HUD Handbook 4000.1, Gifts.

What the gift letter has to say

Both Fannie Mae and FHA ask for a signed letter. FHA wants it signed and dated by the giver and by you. Between the two, the letter should include:

• The giver's name, address and phone number.
• How the giver is related to you.
• The dollar amount of the gift.
• A statement that you don't have to pay it back.

Fannie Mae also asks the giver to say if the money comes from a trust or an estate, and to name that account. We'll send you a letter to fill in, so nobody has to write one from scratch. If the amount changes, sign a new letter. An underwriter will notice when the letter says $20,000 and $25,000 shows up.

How to move the money

Next the lender needs proof the money actually moved. Fannie Mae accepts any of these:

• A copy of the giver's check and your deposit slip.
• The giver's withdrawal slip and your deposit slip.
• Proof of an electronic transfer from the giver to your account or to the closing agent.
• A copy of the giver's check made out to the closing agent.
• A settlement statement showing the closing agent received the giver's check.

If the money goes straight to closing, Fannie Mae wants proof that the giver sent it to the closing agent by wire, certified check, cashier's check or another official check. FHA's rules work the same way. Before closing, the lender needs the giver's bank statement, canceled check or withdrawal receipt plus proof it landed in your account, or a record of the electronic transfer. At closing, it needs a wire record or an official bank check made out to the settlement agent.

In practice, a bank wire is the cleanest. Venmo, Zelle and similar apps can work when the money comes from the giver's bank account, but app transfers often have daily limits and a large gift can end up split into a string of small ones. Each piece then needs its own trail. Cash is harder. Your parents may keep money in a safe at home in Berwyn, and it may be completely theirs, but cash leaves no record of where it came from. Call us before anyone deposits it.

Large deposits get questions, gift or not

Underwriters read your recent bank statements line by line. For a purchase, Fannie Mae calls a single deposit "large" when it's more than half of your total monthly qualifying income. If you need that money for the down payment, closing costs or reserves, the lender has to document where it came from. Source: Fannie Mae Selling Guide B3-4.2-02, Depository Accounts.

That rule catches more than gifts. A tax refund or a paycheck is easy, because the statement shows where it came from. A sold car needs the bill of sale. Wedding gifts are common, and Fannie Mae lists a wedding invitation as one kind of support for them. If you're getting married before you buy, keep the cards and the deposit records together.

When you need some of your own money

On a one-unit home you'll live in, Fannie Mae doesn't require you to put in any of your own money. The gift can cover the whole down payment and closing costs. That's also true for one- to four-unit homes and second homes when the loan is 80% of the value or less.

The rule changes above 80% on a two- to four-unit home you'll live in, or on a second home. There, Fannie Mae requires a 5% minimum contribution from your own funds before gift money fills in the rest. If the giver has lived with you for the past 12 months and will live in the new home too, their gift counts as your own funds for that 5%. Fannie Mae does not allow gifts on an investment property. If you're looking at a two-flat, read our guide to buying a 2-flat in Chicago before you plan the down payment.

Gifts and down payment programs together

A family gift can often sit alongside down payment help from a state, county or city program. Each program has its own rules about how much you have to put in yourself and where it can come from. Our page on first-time buyer programs in Chicago lists what each one asks for. Tell us early if you're planning on both, so we can check them together.

Gift taxes are the giver's question

The IRS says the annual exclusion is $19,000 per person receiving a gift in 2026, and the giver, not you, is generally responsible for any gift tax. Source: IRS, Frequently Asked Questions on Gift Taxes. A gift above that amount may mean a form for the giver to file, so they should check with their tax preparer. If your family already works with a CPA, we're glad to coordinate the plan with them.

When to have the conversation

Before you shop. Gift money changes your budget, and your pre-approval should reflect it from the start. A Chicago listing agent reading your letter wants to know the down payment is real. If the gift hasn't been documented yet, it's one more open item when the seller is choosing between offers.

A good order goes like this. Tell us the amount and who's giving it. We send the letter. The giver signs it and wires the money, either to you before closing or to the title company at closing. We match the wire to the letter and move on.

Common down payment gift questions

Can my parents give me the whole down payment?

Often, yes. On a one-unit home you'll live in, Fannie Mae doesn't require any of your own money, so a gift can cover the full down payment and closing costs. Two- to four-unit homes and second homes above 80% of the value need a 5% contribution from you first.

What does a gift letter need to include?

The giver's name, address and phone number, their relationship to you, the dollar amount, and a statement that you don't have to repay it. FHA wants it signed and dated by both the giver and you.

Can a friend give me money for a down payment?

Sometimes. FHA accepts a close friend with a clearly defined and documented interest in you. Fannie Mae accepts someone with a long family-like or mentoring relationship. A friend who's also the real estate agent or builder on your purchase can't be the giver.

Can the gift be cash?

Cash is hard to document. FHA says cash on hand is not an acceptable source for the giver's funds. Have the giver send the money by wire or check from a bank account so there's a record.

Can I use gift money on an investment property?

Not on a conventional loan sold to Fannie Mae. Fannie Mae does not allow gifts on an investment property.

Do I have to pay tax on a down payment gift?

The IRS says the giver is generally responsible for any gift tax, not the person receiving it. The annual exclusion is $19,000 per recipient in 2026. The giver should ask their tax preparer about any filing.