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Down payment options: Gifts

By Shelley Sines

August 2016

If you’re just setting out to shop for your first home, you already know you’re going to be making a very important financial decision. So forget about starting your homebuying journey by looking for the perfect backyard or a living room with a view.

The down payment should be your first order of business, after you determine what price range to look in. Then you can figure how much money you’ll need to come up with in order to get a mortgage.

Let’s break it down.

Determining the down payment

The rule of thumb is to buy a home that’s no more than three times the amount of your annual salary. So if you make $50,000 a year, you should purchase a home for around $150,000.

For a purchase price of $150,000, you’d need:

  • $4,500 for a 3% down payment (this is the minimum amount many lenders may allow)
  • $15,000 for a 10% down payment
  • $30,000 for a 20% down payment

That’s a lot of savings to part ways with, no matter which option you go with. And you probably don’t want to be flat broke as soon as you sign your closing documents. Because how else will you buy that pergola you’ve had your eye on for your new patio? Plug your own numbers into our down payment calculator to see how different down payment levels will impact your savings.

If you have family or friends who are willing and able to help support you financially, you could hang on to more of your own savings and use gift funds as part or all of the down payment.

For example, here’s a typical scenario: You just graduated from college and landed a pretty good job. You want to focus on saving up for a house, so you (gulp) decide to move back in with your parents. 

Maybe your parents aren’t so thrilled about that prospect, though. I mean, of course they love you, but they just got you OUT of their house — and they’re kind of enjoying all the peace and quiet.

Luckily, there’s an option that could work for everyone involved. Your parents, being the kind and generous people that they are, could gift you cash that you could use for a down payment and closing costs so you can buy a home sooner. In fact, they can even gift you the entire amount of the down payment, and many lenders will allow it, depending on your credit score and the lender’s loan underwriting guidelines. (Keep in mind, some lenders require documentation of gift money, such as a signed letter from the donor and verification of transfer of funds. Check out Zillow’s post for more detailed info on this.)

Not a bad idea, right?

They get to keep their empty-nester freedom, and not worry about you using up all their hot water while you shower or eating that last piece of leftover pizza in the fridge that your dad had been looking forward to ALL day.



Elisa V Rice


Thomas payne

I’m ready to have my own home


Muy bueno el curso me sirvió de mucho para aprender porque no sabía nada acerca de compra

Farrah Vaughn

Very helpful info,

Fran Laycock

This was very helpful and answer a question I was going to ask.

Ariel Delgado

That is the very helpful information, thanks


Good information

Jasim Alawad

Owning a home is a big achievement, also it’s family stability

Tyrone Colleton

The information is very good.

Norris H Matthews

Very good information

Kaddour Yamani

Good information

Alvaro Hurtado



Great info

Demarco Mcdaniel

For me any assistance is necessary


Great information

Charletta morrow

Good idea


Very good information!

Aslin Maravilla

Good information.


Nicely explained

Sabrina Powe

Very good Information!


Great informations

Shelia Gibson

Down payment and equity are very important.

Justin Salisbury

It was helpful


It helped about the down-payment and the Tax on them

Vallie Green

Good info.


Great storyline to explain this topic.

Jorge Cardona Ortiz

Es importante esta información debido a que debes contar con muchos puntos de vista para ver lo que conlleva comprar una casa y ahorrar

Muaad Hussein

I really love the way they brake down the processes

Jacky Richard

Good job always

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Shelley Sines has been writing for MGIC since she graduated from college in 2007. Currently raising a sweet little family with her husband in the suburbs of Milwaukee. Happiest when cooking or gardening. Competitive Scrabble player. Enthusiastic about road trips, wine, good TV.
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