Yes, your parents can absolutely give you money for a down payment, but lenders require documentation like a "gift letter" stating the money is a gift, not a loan, and needs to come from an approved source (usually family) with proof of fund transfer, though FHA loans allow broader sources like employers. The funds must be properly documented with a gift letter and bank statements showing the money came from your parents and went into your account, proving no repayment is expected.
Mortgage Lenders' Requirement of a Gift Letter
But you can overcome that assumption by providing your prospective lender with written documentation showing that the money is truly a gift, not a loan. A simple letter drafted and signed by your parents is the best way to do this.
Can I use a gifted deposit as a first time buyer? Yes, you can use gifts to help make up a mortgage deposit for a first time buyer mortgage. The most common scenario is children receiving a mortgage deposit gift from their parents. Using a gift as a house deposit is different to taking out a loan.
Yes, you can give your daughter $100,000 to buy a house, but you'll need proper documentation for her mortgage lender and you'll likely need to file a gift tax return (IRS Form 709) because the amount exceeds the annual exclusion, though it won't usually result in taxes unless you've used up your large lifetime exemption. Lenders require gift letters proving the funds aren't a loan, and you can avoid gift tax impact by gifting up to the annual limit ($19,000 per person in 2025) each year or by using your substantial lifetime exemption.
If kids have sufficient income to qualify themselves and only need cash, a willing parent should simply “gift” the necessary funds for the down payment and closing costs.
Most mortgage types allow down payment gifts from relatives. Some also allow them from close friends, charitable organizations, employers and other sources. Depending on how long the gifted funds have been in your account, you might not need to provide a mortgage gift letter.
Can I give my son or daughter £20,000? While you can give your son or daughter a cash gift of £20,000 (or more), there may be tax implications. That's because any money you give that exceeds your £3,000 tax-free gift allowance will be added to the value of your estate and may be subject to inheritance tax when you die.
If a parent gives their child a home, there is no income tax for the children. However, the child may have to pay capital gains tax if they sell the property later.
Conventional Loan Down Payment Gift Rules
You'll need to provide a gift letter with information including the gift amount, the donor's contact information and relationship to you and the donor's statement that repayment isn't expected.
Yes, you can transfer $50,000 to a family member, but you'll need to report it to the IRS by filing Form 709 because it exceeds the 2026 annual gift tax exclusion of $19,000 per person, though you likely won't owe tax unless your total lifetime gifts surpass the very large lifetime exemption. For large cash transfers, banks also report it to FinCEN, and you might need a formal gift letter for things like a home down payment to prove it's not a loan.
Can my parents sell me their house for $1? Yes. Your parents can choose a sales price, but may have to contend with potential tax consequences since the IRS could treat the difference between the home's value and sales price as a gift.
Inheriting a home provides a “step-up” in cost basis for capital gains tax purposes, meaning you're taxed only on appreciation after the date of inheritance. By contrast, buying a house for $1 means your cost basis is the original owner's purchase price — potentially leading to higher taxes if you sell in the future.
At a glance:
Any gifts exceeding $19,000 in a year must be reported and contribute to your lifetime exclusion amount. You can gift up to $13.99 million over your lifetime without paying a gift tax on it (as of 2025).
Step-Up in Basis for Inherited Assets
One tax advantage of leaving assets after death is the step-up in basis. This provision allows heirs to inherit assets at their fair market value at the time of death, effectively resetting the capital gains tax to zero for any appreciation during the decedent's lifetime.
Yes, you can gift your son $100,000, but since it's over the 2025 annual exclusion of $19,000, you'll need to file a gift tax return (Form 709), though you likely won't owe taxes unless you've already used up your large lifetime exemption (over $13.99 million in 2025). Your son pays no tax on the gift, but you, as the giver, must report the amount exceeding the annual limit, which counts against your lifetime exemption.
For a $200,000 home, you'll likely need a fair to good credit score: 740+: Best rates and terms. 680-739: Good rates, still very good affordability.