Using Gift Money for a Down Payment in Utah: Who Can Give, Gift Letters, and How to Move the Money
One of the most common questions I get from first-time buyers in St. George is some version of this: "My parents want to help with the down payment. Is that allowed?" The short answer is yes, in a lot of cases it is. Gift money is one of the most common ways buyers here in Southern Utah close the gap between what they've saved and what they need to buy a home.
I'm Alex Hernandez, a mortgage loan officer with Guild Mortgage in St. George. The tricky part with gift funds is documentation, and a gift handled the wrong way can slow down an approval right before closing. In this guide I'll walk you through who can give you a gift, what a gift letter needs to say, how the money should move, and the mistakes I see most often.
Can You Use Gift Money for a Down Payment?
For most loans used to buy a primary residence, yes. Here's how the major loan programs look at it.
Conventional loans
Fannie Mae's Selling Guide section on personal gifts says a borrower buying a principal residence or second home can use gift funds from an acceptable donor for all or part of the down payment, closing costs, or financial reserves. Gifts aren't allowed on an investment property.
There's also a minimum contribution rule. On a one-unit principal residence, Fannie Mae doesn't require any minimum contribution from your own funds, so the entire amount you need to close can come from a gift. On a two- to four-unit primary home or a second home with less than 20% down, you have to put in at least 5% from your own funds before gift money can cover the rest. If you're comparing loan types, my post on FHA vs. conventional loans in Utah covers the bigger picture.
FHA loans
FHA also allows gift funds for the down payment and closing costs. HUD's homebuyer guide, Dispelling Homebuying Myths, says FHA lets you use your own savings or gift funds from acceptable sources. FHA's list of acceptable donors is a little broader than you might expect, which I'll cover below.
VA and USDA loans
Many VA loans in Utah and USDA loans in Southern Utah don't require a down payment at all, but buyers still have closing costs and sometimes want to bring money in. Each program has its own rules about gifts, so if you're using one of these loans, we'll go over exactly what's allowed for your situation.
Who Can Give You a Gift?
Not everyone who wants to help you is an acceptable donor.
Conventional (Fannie Mae) donors
According to Fannie Mae, a gift can come from:
- A relative, meaning your spouse, child, or other dependent, or anyone related to you by blood, marriage, adoption, or legal guardianship.
- A domestic partner or a relative of your domestic partner.
- Someone you're engaged to marry.
- A former relative.
- Someone with a long-standing familial-like or mentorship relationship with you.
FHA donors
HUD's guidance lists acceptable gift sources including a family member, your employer or labor union, a close friend, a charitable organization, and government agencies that run down payment assistance programs. If you're looking at assistance programs rather than a family gift, my guide to down payment assistance in Utah is a good place to start.
Who can't give you a gift
Under both Fannie Mae and FHA rules, the donor can't be someone with an interest in the sale. That means the seller, the real estate agent or broker, the builder, or anyone affiliated with them. (Fannie Mae does carve out one exception: a seller who is also an acceptable donor, like a parent selling to their child, and who isn't affiliated with another interested party.) Builder incentives in Washington County are a separate conversation from a gift.
What Goes in a Gift Letter?
Every gift needs a gift letter. This is a short, signed statement that tells the lender the money really is a gift and not a loan in disguise. I'll give you the form, so you don't need to write it from scratch, but here's what it has to cover.
Fannie Mae requires the letter to be signed by the donor and to include:
- The actual or maximum dollar amount of the gift.
- A statement from the donor that no repayment is expected.
- The donor's name, address, phone number, and relationship to you.
FHA's requirements are similar. HUD's handbook guidance says the gift letter must be signed by both the donor and the borrower and must include the donor's contact information, the dollar amount, the relationship, and a statement that no repayment is required.
Why "no repayment" matters
If you're expected to pay the money back, it isn't a gift. It's a debt, and debts affect how much you qualify for. Signing a gift letter for money you've privately agreed to repay is a serious problem, so if there's any repayment arrangement, tell me up front and we'll figure out the right way to handle it.
How Should the Gift Money Move?
Lenders have to verify where the money came from and that it reached you or the closing table.
Fannie Mae lists several acceptable ways to document the transfer, including:
- A copy of the donor's check and your deposit slip.
- A copy of the donor's withdrawal slip and your deposit slip.
- Proof of an electronic transfer from the donor's account to your account or to the closing agent.
- A copy of the donor's check to the closing agent, or a settlement statement showing it was received.
If the funds go straight to the title company at closing, the lender needs to document that they were sent by wire, certified check, cashier's check, or another official check.
My practical tips for a smooth gift
- Talk to me before the money moves. The timing and method matter, and it's much easier to plan it than to untangle it later.
- Avoid cash. Cash deposits are hard to trace. A check or bank transfer leaves a clear paper trail.
- Keep it simple. One transfer from the donor's account to yours (or to title) is easier to document than money bouncing between several accounts.
- Hang on to everything. Save the check copy, deposit receipt, or transfer confirmation.
What About Gift Taxes?
Buyers sometimes worry that receiving a gift means they'll owe taxes. According to the IRS gift tax FAQ, the donor is generally the one responsible for gift tax, not the person receiving it. The IRS also lists the annual exclusion at $19,000 per recipient for 2026, and each spouse gets their own exclusion, so a married couple can give more to the same person.
Gifts above the annual exclusion don't automatically mean anyone owes tax, but there can be reporting requirements for the donor. I'm a loan officer, not a tax advisor, so if your family is planning a larger gift, have them check with a CPA or tax professional.
Gift of Equity: Buying From Family
If you're buying a home from a parent or other relative, the gift might not be cash at all. A gift of equity is when the seller sells you the home for less than it's worth and the difference counts toward your down payment. Fannie Mae covers this in its own section on gifts of equity, and it's worth exploring if a family member is selling a home here in Southern Utah.
How Gifts Fit Into Your Overall Approval
A gift can help with your down payment and closing costs, but it doesn't replace the rest of the approval. Your income, debts, and credit still matter. If you're working on that side of things, read my post on the credit score you need to buy a house in Utah, and my Utah closing costs guide to see what you'll actually need to bring to the table. Tell me about a planned gift early so your pre-approval reflects how much home you can afford.
Frequently Asked Questions
Can my whole down payment be a gift?
Often, yes. For a one-unit primary residence on a conventional loan, Fannie Mae doesn't require a minimum contribution from your own funds. FHA also allows gifts for the down payment. Your exact loan and property type determine the rules.
Can a friend give me down payment money?
On an FHA loan, a close friend can be an acceptable donor. On a conventional loan, Fannie Mae limits donors to relatives and people with a familial-like or long-standing mentorship relationship with you.
Can I use gift money to buy a rental property?
Not on a conventional loan. Fannie Mae doesn't allow gifts on investment properties.
Does my donor need to show their bank statements?
The lender has to verify the donor had the funds or that the money was transferred to you or the closing agent. What's needed depends on how and when the money moves, so we'll go over it together.
If family is ready to help you buy, you're in a great spot, and a little planning keeps that gift from turning into a headache. You can join our free community, the Utah Homebuyer Club, to learn alongside other local buyers. And when you're ready, get approved and start your home buying journey so we can map out exactly how the gift fits into your purchase.
Equal Housing Opportunity. Alex Hernandez, NMLS #1605167. This article is for general educational purposes only and is not tax or legal advice, a commitment to lend, or an offer of credit. All loans are subject to credit approval, underwriting, and property eligibility. Program guidelines, including gift fund rules, can change and may vary by loan program and lender. Consult a tax professional about gift tax questions.