Many Florida buyers get help from family with the down payment or closing costs. Lenders welcome it, but they treat a gift very differently from a deposit that simply shows up in your account. The rules come down to three things: who is allowed to give, what paperwork proves it is a true gift, and how the money has to move. Get those right early and the gift will not slow your closing.

What counts as a gift in mortgage underwriting

A gift is money you do not have to repay. Underwriters need to be sure of that, because a loan disguised as a gift adds a debt that would change your qualifying numbers. That is why the lender asks for a signed gift letter and traces where the money came from.

Who can give you gift funds

The list of acceptable donors depends on the loan program.

  • FHA. HUD Handbook 4000.1 has allowed gifts from a family member, the borrower’s employer or labor union, a close friend with a clearly defined and documented interest in the borrower, a charitable organization, or a government agency or public entity with a homeownership assistance program for low- or moderate-income families or first-time buyers.
  • Conventional (Fannie Mae). A donor must be a relative (by blood, marriage, adoption or legal guardianship) or a non-relative with a familial relationship, such as a domestic partner, a fiancé or fiancée, a former relative, or someone with a long-standing familial-like or mentorship relationship. The donor may not be, or be affiliated with, the builder, the developer, the real estate agent or any other interested party in the transaction.

Because the rules differ by program and by lender, ask before the donor moves any money. If you are weighing programs, our guide to FHA loans for Florida first-time buyers explains how that loan works.

How much of the cash to close can be a gift?

For a conventional loan, Fannie Mae’s Selling Guide says gift funds may cover all or part of the down payment, closing costs or reserves on a principal residence or second home. When the loan-to-value ratio is 80% or less, no minimum contribution from your own funds is required. On a one-unit primary residence above 80% LTV, no minimum contribution from your own funds is required either. For a two- to four-unit primary residence or a second home above 80% LTV, you must put in 5% from your own funds first. Gifts are not allowed on an investment property.

Other programs and some lenders add their own limits, so confirm yours. A VA loan often needs no down payment at all, as we explain in VA loans in Florida, but you may still need cash for closing costs.

The gift letter

Both HUD and Fannie Mae require a signed gift letter. HUD’s version must be signed and dated by the donor and the borrower and include:

  • the donor’s name, address and telephone number,
  • the donor’s relationship to the borrower,
  • the dollar amount of the gift, and
  • a statement that no repayment is required.

Fannie Mae’s gift letter asks for the same core items: the amount (actual or maximum), the donor’s statement that no repayment is expected, and the donor’s name, address, phone and relationship.

Proving where the money came from and how it moved

The lender must also verify the transfer. Under HUD’s FHA guidance, if the gift is verified before closing, the lender needs one of these:

  • the donor’s bank statement showing the withdrawal plus evidence of the deposit into your account,
  • the donor’s canceled check plus evidence of deposit,
  • the donor’s withdrawal receipt plus evidence of deposit, or
  • evidence of an electronic transfer from the donor’s account to yours.

If the gift goes straight to the settlement agent at closing, the lender needs evidence of an electronic transfer, or a bank certified check, cashier’s check or other official bank check. Whichever route is used, the lender must be able to reasonably determine the funds did not come from an unacceptable source.

One point that surprises families: HUD states that cash on hand is not an acceptable source of donor gift funds. A parent who pulls cash from a safe and hands it to you creates a paper trail problem. Have the donor move the money through a bank account first, and keep the statements.

A simple timeline that avoids delays

  1. Before you write offers: tell your loan officer a gift is likely, and ask which donors and documents your loan program accepts. A strong pre-approval should reflect the gift.
  2. Before the deposit is due: if the gift will cover your earnest money, document it too. Our partner site explains how Florida earnest money deposits and escrow work, including deadlines you cannot miss.
  3. Once the amount is set: have the donor sign the gift letter and send the transfer through their bank, not as cash.
  4. Keep every statement: underwriters often ask for both the donor’s and your statements, so do not move the funds again until the loan closes.

Budget for the whole cost, not just the down payment

A gift can make the cash side workable, but the monthly payment still has to fit. Review the Florida closing costs, doc stamps and intangible tax that you may be asked to cover, and check how escrow for insurance and taxes affects your payment. If you also want to lower your rate with cash, read about discount points versus lender credits. Keep some of the gift for inspection and repair needs: a home inspection before closing is a small cost next to a surprise roof or electrical problem.

Common mistakes

  • Depositing a large amount of cash with no paper trail.
  • Letting a donor “lend” the money informally, with an expectation of repayment.
  • Using a seller, builder or agent as the gift source on a conventional loan.
  • Waiting until underwriting to ask which documents are required.
  • Moving the money around after it is verified.

Frequently asked questions

Can a gift cover my entire down payment?

Often, yes. On a conventional one-unit primary residence, Fannie Mae allows the whole amount to come from a gift. Other programs and lenders have their own rules, so confirm with your loan officer.

Does the donor have to pay gift tax?

That is a tax question, not a lending one. The IRS rules on gift tax filing are separate from the mortgage process, so a donor with a large gift should ask a tax professional.

Is cash from a relative acceptable?

Not directly. HUD says cash on hand is not an acceptable source of donor gift funds. The donor should deposit the money in their bank account and transfer it traceably.

Can a friend give me a gift?

For FHA, a close friend must have a clearly defined and documented interest in the borrower. Conventional rules are narrower and look for a familial-like or mentorship relationship. Ask your lender about your specific situation.

Do I have to repay a gift if I sell the house?

No. By definition, a gift requires no repayment, and the donor signs a statement saying so. A donor who expects repayment should structure it as a loan, which lenders count as debt.

Written by Tariq AbouAdma, Mortgage Loan Originator, NMLS #2724176 (Loan Factory NMLS #320841). Sources: HUD Handbook 4000.1 and HUD FHA Resource Center (gift documentation); Fannie Mae Selling Guide B3-4.3-04, Personal Gifts. This article is educational, not a loan offer or commitment; programs, requirements and terms vary by lender and borrower and can change. Questions about using gift funds on your own purchase? Call Quality Real Estate Finance at 407-476-6667.