How Do Down Payment Gifts Affect Your Home Loan?

down payment


Graduation from medical school is one of the most cherished milestones in a physician’s life. Not only is med school one of the most difficult graduate programs to enter and complete, unlike most degrees, there is still a challenging residency program ahead. Along with the well-deserved accolades and celebrations, it’s not uncommon for graduates to receive gifts to commemorate this special occasion—and a growing number of graduates are opting for monetary gifts in the form of down payment assistance from family and relatives so they can begin settling into their new lives.


In an online survey conducted in 2023, 39% of homeowners received down payment assistance from family members. Of this group, 78% were recent school graduates between the ages of 18-26 and 54% were between the ages of 27-42. So, if you’re one of the lucky folks whose family members are willing to help support you in this next leg of your journey, you’re not alone—but there are some things you need to know about how down payment gifts apply when purchasing a home through a lender:


Understanding Down Payment Gifts

A down payment gift refers to money received from someone else to use toward a down payment or closing costs during a home purchase. These gifts do not require repayment.


Rules and Documentation

Different loan types have varying restrictions on who can provide financial gifts, how they can be used, and the documentation required. Most lenders will require a gift letter detailing the giver’s information, their relationship to you, the amount gifted, and a confirmation that repayment is not necessary. Verification of sufficient funds and documentation of the transfer may also be needed.


Loan-Specific Gift Rules

Conventional Loans: Gift sources are typically limited to romantic partners and family members, and the funds can be used for down payments, closing costs, or financial reserves.

FHA Loans: Gifts can come from friends, family, employers, or other entities, and can be used for various expenses like closing costs, mortgage expenses, or down payments.

USDA Loans: While zero money down is required, gift funds can be used for closing costs but not for financial reserves. Gifts must come from specific sources like family members, employers, or charitable organizations.

VA Loans: No down payment is required, and gift funds can be used for down payments, closing costs, or funding fees. Almost any person can provide the gift funds.

Physician Home Loans: Physician home loans, designed specifically for medical professionals, often have unique features and benefits, including lenient down payment requirements. Some physician loan programs allow for the use of gift funds from family members to cover down payments and closing costs, providing added flexibility to resident physicians during the home buying process.


Before applying for a loan, it’s crucial to discuss the lender’s gift rules, especially in the context of physician home loans, to ensure compliance with their requirements.


If you have questions about gift funds for down payments, join us for our live webinar “Preparing for Match Day” where an experienced mortgage lender and a real estate expert can answer any questions you might have. This discussion will be geared towards medical students getting ready for the aftermath of Match Day but is not limited to just that audience. So bring on your questions!

🏠 Topic: Preparing for Match Day
📅 Date: March 6, 2024
Time: 1:00pm Pacific Time
📍 Venue: Virtual (Zoom link provided post-registration)


Register now to secure your spot. Can’t make it? Don’t worry, simply sign up, and a recording will be sent to your email, ensuring you won’t miss out on valuable insights and knowledge-sharing.


This blog post is for informational purposes only and is not intended as financial or real estate advice. Consult with a professional advisor before making any significant financial decisions.