I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. Call (800) 239-1103.
In California, where down payments on median-priced homes can reach $150,000–$300,000, gift money from family members is one of the most common ways buyers bridge the gap. The good news: all major mortgage programs allow gift funds. The catch: lenders have strict documentation requirements, and using gift money incorrectly can derail your closing. Here’s everything you need to know about using gift funds for a California home purchase in 2026.
Who Can Give You a Down Payment Gift?
Lenders restrict who can provide gift funds. Acceptable gift sources vary by loan type but generally include family members (parents, grandparents, siblings, aunts/uncles, cousins), domestic partners or fiancé(e)s, and non-profits and government programs (down payment assistance grants count as gifts on FHA and conventional loans). Gifts from employers, friends, or unrelated third parties are generally not allowed. Gifts from someone with an interest in the transaction — seller, builder, real estate agent — are prohibited.
Gift Fund Rules by Loan Type
Conventional Loans (Fannie Mae / Freddie Mac)
On a primary residence with 20%+ down, 100% of the down payment can be gifted. With less than 20% down on a primary residence, 100% can still be gifted — you just need to document your own funds for reserves separately if required. Investment properties don’t allow gift funds at all — all funds must come from the borrower. Second homes allow gift funds but you must have at least 5% from your own funds.
FHA Loans
FHA is very gift-friendly. The entire 3.5% minimum down payment can come from a gift. The gift can also cover closing costs. FHA requires a gift letter and documentation that the gift was transferred — but the sourcing rules are somewhat less rigid than conventional.
VA Loans
Since VA loans require no down payment, gift funds aren’t usually needed for the down payment itself. However, gift funds can be used toward closing costs and the funding fee if applicable.
Jumbo Loans
Jumbo lenders (non-conforming, above the 2026 Marin County limit of $1,249,125) have stricter policies. Many require that at least 10–20% of the purchase price come from the borrower’s own funds, with gift funds restricted to supplemental amounts. Requirements vary by lender — a mortgage broker shopping multiple jumbo lenders can identify which have the most gift-friendly guidelines.
The Gift Letter: What It Must Say
Every gift requires a signed gift letter. Lenders will provide a template, but the letter must include: the donor’s name, address, and phone number; their relationship to the borrower; the dollar amount of the gift; the address of the property being purchased; and a clear statement that the funds are a gift and not a loan — no repayment is expected or required. The “not a loan” clause is critical. If there is any expectation of repayment, the gift becomes a debt counted in your DTI.
Documenting Gift Funds: What Lenders Actually Want to See
A gift letter alone is not enough. Lenders will also require the donor’s bank statements (typically 2–3 months showing the funds were available before the gift), transfer documentation (wire confirmation, cashier’s check, or bank-to-bank receipt — cash gifts are nearly impossible to document), and your bank statement showing the deposit landing in your account. Large deposits without documentation trigger underwriter questions, which is why you should transfer the gift well before closing and have the paperwork ready before submitting your application.
Timing: When to Transfer Gift Funds
Ideally, transfer gift funds into your account at least 60 days before applying for a mortgage. When funds have been “seasoned” — sitting in your account for 2+ months — most lenders simply count them as your own funds without requiring the gift documentation process at all. This is the cleanest approach and avoids the paper trail complexity entirely. If timing doesn’t allow for 60-day seasoning, the gift can still work — just be prepared for the full documentation process.
California Down Payment Assistance: A Related Option
If family gifts aren’t available, California has several state and local programs that provide down payment assistance treated as grants (no repayment) or deferred-payment silent seconds: CalHFA MyHome (deferred junior loan up to 3.5% of purchase price for FHA, 3% for conventional), CalHFA Dream For All (shared appreciation program providing up to 20% of purchase price, subject to availability), Golden State Finance Authority Platinum (grant-based, no repayment required), and many local county and city programs — particularly in Bay Area and LA counties.
Frequently Asked Questions
Can my parents give me money for a down payment without tax consequences?
The donor may need to file a gift tax return (IRS Form 709) if the gift exceeds the annual exclusion ($18,000 per person in 2024, adjusted annually). However, actual gift tax is rarely owed — most donors have significant lifetime exemption available ($13.6M in 2024). The mortgage lender doesn’t care about the tax implications; they care about documentation. Your parents will need to provide a signed gift letter, 2–3 months of bank statements showing the funds, and confirmation of the transfer. The tax question is separate and something to discuss with a CPA.
Can gift funds be used for closing costs in California?
Yes, on FHA and conventional loans. Gift funds can cover both the down payment and closing costs. VA loans allow gift funds for closing costs as well. On a $900,000 California home, closing costs typically run $15,000–$25,000 on top of the down payment — getting those costs covered by a gift can be just as valuable as help with the down payment itself. The same documentation requirements apply regardless of whether the gift is used for down payment, closing costs, or both.
What if the donor can’t provide bank statements?
This is a real problem. Most lenders require standard bank statements showing the funds were available. If the donor won’t or can’t provide them, the best alternative is seasoning: transfer the gift money into your own account at least 60–90 days before applying, and it will simply appear as your own seasoned funds with no gift documentation required at all. This is the cleanest solution when donor documentation is unavailable. Some lenders accept alternative documentation (signed letter from a bank, brokerage statements), but bank statements remain the standard. Plan ahead whenever possible.
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
