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What Is a Gift Letter and Can Family Help With My Down Payment in Texas?

TL;DR: Yes — in Texas a family member can usually help with your down payment if the money is a true gift with no repayment, evidenced by a signed gift letter and a paper trail. The rules vary by loan type, and your lender decides in writing.

Gift money is one of the most common questions I get from buyers: "My parents want to help. Can they?" The short answer is yes. The longer answer is that family money is not like your own savings — it has a form, a letter and a trace, and getting that part wrong can cost a closing date.

Key Takeaways

• A gift letter is a signed statement from the person giving the money confirming it is a gift, not a loan.
• The gift must be truly a gift — no repayment, no private side agreement, no interest.
• The donor cannot be someone who benefits from the sale, such as the builder, the developer or the real estate agent.
• The lender must be able to trace the money from the donor's account to yours or to the closing agent.
• Rules vary by loan type: conventional, FHA, VA and USDA each have their own documentation standards.
• Whether a gift can cover the entire down payment depends on the loan and the lender — ask for that answer in writing.

Table of Contents

1. What is a gift letter?
2. Who can give a gift toward a down payment?
3. What the gift letter must say
4. How each loan type treats gift funds
5. How to document the transfer
6. Gift of equity: when the gift is the house
7. Can the whole down payment come from a gift?
8. Common mistakes that slow down an approval
9. Does a gift trigger the gift tax?
10. How a Texas agent helps with the paperwork
11. Frequently asked questions

What is a gift letter?

A gift letter is a signed document in which the person giving the money states the amount, their relationship to the buyer, and that no repayment is expected. Lenders use it to confirm the money arriving in a buyer's account is not a hidden loan.

That distinction matters: a gift adds dollars without adding debt; a loan dressed up as a gift adds dollars and a monthly payment the lender has to count. The specifics are set by the loan program, not by the agent. Fannie Mae's Selling Guide B3-4.3-04, Personal Gifts, last updated February 4, 2026, describes the letter a lender must collect before counting gift funds on a conventional loan.

Who can give a gift toward a down payment?

HUD Handbook 4000.1 lists the FHA-acceptable donors as a family member; the buyer's employer or labor union; a close friend with a documented interest in the buyer; a charitable organization; and a government agency or public entity with a homeownership program for low- or moderate-income or first-time buyers.

Fannie Mae's Selling Guide B3-4.3-04, Personal Gifts (February 4, 2026) allows, for a conventional loan, a relative — the buyer's spouse, child or other dependent, or anyone related by blood, marriage, adoption or legal guardianship — plus a non-relative with a familial relationship: a domestic partner or their relative, a fiancé, a former relative, or someone with a long-standing familial-like or mentorship relationship.

What the gift letter must say

The program guides converge on the same short list, and the lender usually supplies a form. Fannie Mae's standard (conventional loans): Fannie Mae's Selling Guide B3-4.3-04, Personal Gifts (February 4, 2026) requires the actual or maximum dollar amount, the donor's statement that no repayment is expected, and the donor's name, address, telephone number and relationship to the buyer.

HUD's standard (FHA loans): HUD Handbook 4000.1 requires the letter be signed and dated by both the donor and the buyer, and include the donor's name, address and telephone number, the donor's relationship to the buyer, the dollar amount, and a no-repayment statement.

VA's standard: the VA Lenders Handbook (VA Pamphlet 26-7) requires the amount, a no-repayment statement, and the donor's name, address, telephone number and relationship to the borrower.

Element	Conventional (Fannie Mae)	FHA (HUD)	VA
Gift amount	Required	Required	Required
"No repayment expected" statement	Required	Required	Required
Donor name, address, phone	Required	Required	Required
Relationship to buyer	Required	Required	Required
Signed by donor	Required	Required	Required
Signed by buyer	Not stated in the guide	Required	Not stated in the guide
Source: Fannie Mae B3-4.3-04 (Feb 4, 2026); HUD Handbook 4000.1; VA Pamphlet 26-7 Ch. 4 T. 4 (Feb 22, 2019)

What a gift letter should not say

• Anything suggesting a loan. No interest rate, no repayment schedule, no "pay me back later."
• A different story than the bank records. If the letter says "savings" and the statement shows a transfer from a credit line, that stalls files.

How each loan type treats gift funds

Each program sets its own floor for how much can come from family, even when the letter looks identical.

Conventional loans

Fannie Mae's Selling Guide B3-4.3-04, Personal Gifts, updated February 4, 2026, allows gift funds for all or part of the down payment, closing costs, or financial reserves on a principal residence or second home. No gifts on an investment property.

The minimum borrower contribution rules, as stated in that same guide:

• At an LTV, CLTV or HCLTV ratio of 80% or less for a one- to four-unit principal residence or second home, no minimum borrower contribution is required — all funds needed to close can come from a gift (Fannie Mae Selling Guide B3-4.3-04, February 4, 2026).
• Above 80% on a one-unit principal residence, again no minimum borrower contribution is required (Fannie Mae Selling Guide B3-4.3-04, February 4, 2026).
• Above 80% on a two- to four-unit principal residence or a second home, the borrower must contribute 5% from their own funds, after which gifts can supplement (Fannie Mae Selling Guide B3-4.3-04, February 4, 2026).

There is also a special path: if the donor has lived with the buyer for the past 12 months and will keep living in the new home, a donor certification plus matching-address documents can let the gift count as the buyer's own funds.

FHA loans

FHA requires a minimum required investment from the buyer, which HUD Handbook 4000.1 (accessed November 13, 2026) defines as at least 3.5% of the property's adjusted value.

The source rules are the part buyers most often miss. HUD requires that minimum investment to come from a permissible source under Section 203(b)(9)(C) of the National Housing Act — not from the seller, any other person or entity who financially benefits from the transaction, or anyone reimbursed by one of those parties. HUD also states that cash on hand is not an acceptable source of donor gift funds: the money has to trace to a real account.

VA loans

VA structures its program around a veteran's entitlement rather than a fixed percentage down payment, and permits gifts from a donor with no affiliation to the builder, developer, real estate agent or any other interested party, per the VA Lenders Handbook (VA Pamphlet 26-7). Two VA-specific points from the same chapter: the lender must verify the transfer of the funds, not just the letter, and gift funds cannot be used to meet reserve requirements.

USDA loans

USDA's guaranteed rural housing program runs on its own handbook — USDA Rural Development HB-1-3555 — with its own gift standards. Since USDA also depends on location and household income, ask the lender both questions at once: eligibility, and what gift documentation that program requires.

How to document the transfer

The letter is not enough. The lender has to see the money move. Fannie Mae's Selling Guide B3-4.3-04, Personal Gifts (February 4, 2026) accepts any of these:

• A copy of the donor's check and the borrower's deposit slip
• A copy of the donor's withdrawal slip and the borrower's deposit slip
• Evidence of the electronic transfer from the donor's account to the borrower's account or to the closing agent
• A copy of the donor's check to the closing agent
• A settlement statement showing receipt of the donor's check

When the money is not transferred before settlement, the lender must document that the donor gave the closing agent the funds by wire, certified check, cashier's check or another official check.

Photo by Gabrielle Henderson on Unsplash

Gift of equity: when the gift is the house

A gift of equity happens when a family member sells a home to a relative below its appraised value, and the difference counts as the gift. Fannie Mae's Selling Guide B3-4.3-04, Personal Gifts allows gifts of equity but notes that a gift of equity may not be used for financial reserves, and Fannie Mae's Selling Guide B3-4.3-05, Gifts of Equity requires a signed gift letter and specific documentation in the loan file. FHA's rule is narrower: HUD Handbook 4000.1 states that only family members may provide equity credit as a gift on property being sold to other family members.

Can the whole down payment come from a gift?

For most conventional one-unit primary residences, Fannie Mae does not require a minimum borrower contribution from the borrower's own funds, which means a gift can cover the full down payment and closing costs (Fannie Mae Selling Guide B3-4.3-04, February 4, 2026). For a two- to four-unit home purchased above 80% LTV under the conventional program, the borrower needs to bring 5% of their own funds (Fannie Mae Selling Guide B3-4.3-04, February 4, 2026).

FHA is stricter about where the minimum required investment comes from, even though a family member's gift is an acceptable source. The lender has to document the source's permissibility, which is why the paper trail matters so much on an FHA file.

Common mistakes that slow down an approval

Most stalled gift files trace back to one of these five.

The money arrived before anyone told the lender. A large unexplained deposit becomes a mid-process documentation exercise.

The donor's statement does not show the money. A donor with funds spread across accounts, or borrowing to give, complicates the trace.

The letter and the transfer disagree. One amount in the letter, another in the wire. Use the exact figure.

Cash was involved. Money without a bank record cannot be traced.

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Does a gift trigger the gift tax?

That is a question for a tax professional, not for the lender and not for me. What helps is knowing what the IRS publishes. The IRS frequently asked questions on gift taxes (accessed November 13, 2026) states that the donor is generally the party responsible for any gift tax, and that gifts of no more than the annual exclusion for the calendar year generally are not taxable gifts. For 2026, the same IRS page lists the annual exclusion at 19,000 dollars per donee (IRS gift tax FAQ, accessed November 13, 2026).

How a Texas agent helps with the paperwork

The lender decides whether the gift counts and what the letter must say. The title company handles how the money reaches the closing table. The agent keeps the contract calendar and makes sure the right documents arrive on time. In practice:

• Flag the gift early, usually at the pre-approval stage, so the lender can say what is needed.
• Protect the closing date. The CFPB explains (last reviewed May 2, 2023) that the lender must deliver the Closing Disclosure at least three business days before closing — a window that does not stretch because a bank statement arrived late.
• Point to the right professional for tax, probate or immigration questions. Those are different licenses, and the people who hold them should answer.

I am the agent in these transactions, not the lender. Terms, eligibility and acceptable sources of funds are set by the lender, case by case, in writing.

Buying in Central Texas?

If family money is part of your down payment plan, the earlier your lender knows, the smoother the file.

Book a free consultation →

Frequently asked questions

Can my parents give me money for a down payment in Texas? Usually yes. A parent is an acceptable donor for conventional, FHA and VA loans, as long as the money is a true gift with no repayment expectation, the letter is signed and the transfer is documented. Your lender confirms acceptance for your file.

Can family pay the entire down payment? For many conventional one-unit primary residences, a gift can cover the full down payment and closing costs. FHA sets a minimum required investment with stricter source rules. Ask your lender to confirm in writing.

Can family help with closing costs instead? Yes. Fannie Mae's Selling Guide B3-4.3-04, Personal Gifts describes gift funds as usable for the down payment, closing costs or financial reserves, subject to the minimum contribution rules. Your lender confirms the scope.

Sources

• Fannie Mae Selling Guide B3-4.3-04, Personal Gifts — updated February 4, 2026. Accessed November 13, 2026.
• Fannie Mae Selling Guide B3-4.3-05, Gifts of Equity. Accessed November 13, 2026.
• HUD Handbook 4000.1 — FHA Single Family Housing Policy Handbook, gifts and minimum required investment. Accessed November 13, 2026.
• VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 4 — revised February 22, 2019. Accessed November 13, 2026.
• USDA Rural Development HB-1-3555. Accessed November 13, 2026.
• IRS frequently asked questions on gift taxes. Accessed November 13, 2026.
• CFPB, What is a Closing Disclosure? — last reviewed May 2, 2023. Accessed November 13, 2026.

Keep reading

• How Much Down Payment Do You Need in Austin, TX?
• Homebuyer Assistance Programs in Texas: Grants, Loans & Help 2026
• How to Get Pre-Approved for a Mortgage in Austin: 2026 Guide
• What Is Earnest Money in Texas Real Estate?

Last Updated: November 2026

About the Author

Sully Ruiz is a Texas-licensed real estate agent (TREC #0742907). Her sponsoring broker is Keller Williams Austin NW. She works with buyers and sellers in Austin and Central Texas, in English and Spanish — as their real estate agent, not their lender.

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Market data is for informational purposes only and is subject to change. Sources are believed to be reliable but are not guaranteed. Contact Sully Ruiz for a personalized market analysis.