Using Gift Funds for a Down Payment in Maryland

If your parents, grandparents, or another close relative are helping you buy a home in Bethesda, you're in good company. On a $1.2 million home in Chevy Chase or Potomac, a 20% down payment is $240,000 — and a lot of buyers here bridge that gap with family help. The good news: mortgage lenders expect this, and they have a clear process for it. The catch: if you handle the money the wrong way, you can turn a simple gift into a documentation headache that stalls your closing.

Here's exactly how using gift funds for a down payment works in Maryland, who's allowed to give you the money, what your lender will ask for, and how to avoid the mistakes that trip people up.

How gift funds for a down payment work

A down payment gift is money someone gives you — with no expectation of repayment — to put toward your home purchase. That last part is the whole point. Lenders care intensely that the money is a true gift and not a loan in disguise, because a loan would change your debt-to-income ratio and your ability to repay the mortgage.

How much of your down payment can come from a gift depends on your loan type:

• Conventional loans: On a primary residence, the entire down payment can come from gift funds. You don't have to contribute any of your own money if you're putting down enough to satisfy the program.
• FHA loans: The full 3.5% minimum down payment can be gifted, and gift money can also go toward closing costs.
• VA loans: These require no down payment at all, so gift funds usually go toward closing costs or the funding fee instead.
• Jumbo loans: This is where the rules tighten — more on that below, because in Bethesda a large share of purchases land in jumbo territory.

For most Bethesda and Montgomery County buyers using a conventional loan, that means a gift can cover your down payment in full. What matters most is not the amount — it's proving where the money came from and that you don't owe it back.

Who can give you the money

Not everyone qualifies as a gift donor, and the rules vary by loan program.

On a conventional loan, the donor generally has to be a relative — a parent, grandparent, sibling, spouse, domestic partner, or fiancé. Some programs also allow godparents or a documented long-term partner. FHA loans open the door wider, allowing gifts from an employer, a charitable organization, or a government down payment program in addition to family. VA and USDA loans are the most flexible, accepting gifts from almost anyone.

There's one firm line across every loan type: the donor cannot be a party with a financial interest in the sale. That rules out the seller, the home builder, the listing or buyer's agent, and anyone else who profits from the transaction. If a builder offering incentives on a new-construction home in North Bethesda offers to "gift" your down payment, that's not an allowable gift — it's a sales concession, and it has to be treated as one.

A gift of equity is a special case worth knowing about. If a family member sells you their home for less than it's worth — say, parents selling you their Bethesda house for $900,000 when it appraises at $1.05 million — that $150,000 difference can count as your down payment gift. It's a common way families transfer property here without anyone writing a check, and it's fully allowed as long as it's documented on the closing statement.

What your lender needs to see

Two things make gift funds work: a gift letter and a clean paper trail.

The gift letter is a short signed statement from your donor. It needs to include the donor's name, address, and phone number, their relationship to you, the exact dollar amount, the date, the address of the home you're buying, and explicit language that the money is a gift with no expectation of repayment and no ownership stake in the property. Both you and the donor sign it. It doesn't need to be notarized.

The paper trail is where people stumble. Your lender wants to trace the money from the donor's account into yours. In practice, that means:

1. The donor provides a bank statement showing they had the funds.
2. The transfer happens cleanly — ideally a single wire or check, deposited on its own, not mixed with other deposits.
3. Your bank statement shows the deposit matching the gift letter amount.

Never take the gift in cash. Cash can't be sourced, and an un-sourced large deposit is exactly what makes an underwriter nervous.

Timing helps too. Lenders review your last two months of bank statements, so a gift that has been sitting in your account for more than 60 days is considered "seasoned" and draws far less scrutiny — sometimes none at all. A large deposit that shows up two weeks before closing gets flagged and documented. If you know a gift is coming, getting it into your account early makes the whole file smoother. This is exactly the kind of timing I walk my buyers through before we write an offer, alongside getting pre-approved so your funds are ready when the right home hits the market.

Gift funds, jumbo loans, and the tax question in Bethesda

Two Bethesda-specific wrinkles are worth understanding before you rely on gift money.

First, jumbo loans. For 2026, the conforming loan limit in Montgomery County — a designated high-cost area — is $1,249,125 for a single-unit home, well above the $832,750 national baseline. Borrow above that ceiling and you're in jumbo loan territory, which is common on higher-priced Bethesda, Potomac, and Chevy Chase homes. Jumbo lenders write their own rules, and many require you to put in a minimum amount of your own money — often around 5% of the price — before gift funds can make up the rest. So on a $1.6 million home, a lender might want to see roughly $80,000 of your own savings even if a parent is gifting the balance. Always confirm your specific lender's gift policy early if you're financing above the conforming limit.

Second, taxes. This is the question donors ask most, and the answer usually relieves them: as the person receiving a down payment gift, you owe no tax on it, period. On the giving side, the IRS lets each person give up to $19,000 per recipient in 2026 without filing anything. That means two parents can together give you and a spouse up to $76,000 in a single year with no gift-tax return at all. Give more than the annual exclusion and the donor simply files IRS Form 709 — but no tax is actually due until they exceed the lifetime exemption, which is $15 million per person in 2026. For virtually every Bethesda family, a down payment gift has no real tax cost; it's just paperwork.

Keep in mind that a gift reduces how much you borrow, which can also help you avoid paying PMI if it pushes you to 20% down. And if the gift alone won't get you there, it can stack with other help — the first-time homebuyer and down payment assistance programs available in Montgomery County are a separate track from private family gifts, and some buyers use both.

The bottom line

Using gift funds for a down payment is one of the most common — and most lender-friendly — ways families help buyers get into a home in Bethesda. The money itself is rarely the problem. What matters is documenting it correctly: a signed gift letter, a clean transfer, and a paper trail your underwriter can follow. Handle those three things right and a gift moves your purchase forward instead of holding it up.

If you're planning to use family help to buy in Bethesda or anywhere in Montgomery County, I'm happy to walk you and your lender through exactly how to structure it so your closing stays on track. Reach out anytime.

About Pey Behin

Pey Behin is a residential real estate agent serving the Washington, DC metro area, with a focus on Bethesda, Montgomery County, and Northern Virginia. He works with buyers and sellers who want clear strategy, data-driven pricing, and direct guidance throughout the transaction process.