If you are thinking of buying a home, you may be lucky enough to have friends and family that are willing to contribute to your down payment. Where the money comes from makes a difference to the bank because they need to be sure it isn’t considered a loan that must be repaid. Gift money may require you to get “gift letters” from each person contributing to attest that it is not a loan. Gifts from friends can get trickier, so try to stick to family only. It’s best to check with your lender before accepting any money from anyone.

Key Takeaways:

The reason is that a loan would have to be added into the debt calculations the lender uses to ensure you can afford to repay the mortgage.
Despite the convenience of online and mobile banking apps, you may still want to go old school to create a paper trail for the gift. This makes it easier for a lender to trace the gift.
Make a copy of the check for both your benefactor and yourself. The lender will need to see this.

“It’s a good problem to have: family members or close friends who want to contribute to your down payment. However, under the current banking regulations, how, when, and from whom you accept gifted funds to put toward the down payment on a home matters.”