Fannie Mae Gift Fund Requirements: Sourcing, Documentation, and Eligible Donors

Gift funds are one of the most common sources of down payment for Fannie Mae loans, and one of the most common sources of audit findings. The requirements are specific: wrong donor, missing documentation, or a sloppy paper trail can turn a clean file into a conditioned one. This guide walks through the rules as defined in Fannie Mae Selling Guide B3-4.3.

Who can be an eligible donor?

Fannie Mae Selling Guide B3-4.3-04 (updated February 4, 2026) defines eligible personal gift donors. Not everyone qualifies:

A relative, defined as the borrower's spouse, child, or other dependent, or any individual related by blood, marriage, adoption, or legal guardianship
A non-relative with a familial relationship: a domestic partner (or relative of the domestic partner), an individual engaged to marry the borrower, a former relative, or an individual with a long-standing familial-like or mentorship relationship with the borrower

The donor cannot be affiliated with the builder, developer, real estate agent, or any other interested party to the transaction (except a seller who is also an acceptable donor).

Grants from employers, labor unions, nonprofits (501(c)(3) organizations), and government agencies are covered under separate Selling Guide sections (B3-4.3-06 for grants and lender contributions, B3-4.3-08 for employer assistance). These are not personal gifts and have their own documentation requirements.

What documentation does Fannie Mae require?

Three documents are required for every gift fund transaction:

Gift letter. Must include the donor's name, address, and phone number; the donor's relationship to the borrower; the dollar amount; and a statement that no repayment is expected or implied.
Evidence of transfer. Documentation proving the donor actually sent the funds: a bank statement showing the withdrawal, a wire transfer confirmation, or a canceled check.
Borrower's deposit confirmation. A bank statement showing the gift funds deposited into the borrower's account.

If the donor transfers funds directly to escrow or the title company at closing, the settlement statement serves as evidence of transfer.

How do you source gift funds correctly?

Sourcing is where most audit findings originate. The underwriter needs to see a clear, unbroken chain from the donor's account to the borrower's account (or to escrow).

Document the donor's ability to give. Fannie Mae requires the lender to verify that sufficient funds are either in the donor's account or have been transferred to the borrower's account. A donor bank statement showing the funds is the most common way to satisfy this, but transfer documentation (a canceled donor check plus the borrower's deposit slip, for example) can also carry it.
Avoid intermediate accounts. If the gift passes through a third account before reaching the borrower, every step in the chain needs documentation. The simplest path is a direct transfer from donor to borrower.
Deposit early. Gift funds deposited the day before closing create verification headaches. Get the deposit done well before final document preparation so the bank statement shows the funds seasoned in the account.

What are the most common audit findings?

Based on common underwriting conditions related to gift funds:

Missing donor bank statement. The gift letter alone is not enough. Without evidence of the donor's ability to give, the file will be conditioned.
Unclear donor relationship. If the relationship is not documented in the gift letter or is ambiguous (e.g., "family friend"), expect a condition.
Unsourced large deposits. If the borrower's bank statement shows a large deposit and the gift letter amount does not match, the underwriter will ask questions.
Gift letter missing required fields. Every field matters. A letter that says "I'm giving $20,000 to my son" but omits the donor's address or phone number is incomplete under B3-4.3.

How do gift fund rules differ by LTV?

Fannie Mae's minimum borrower contribution rules vary by property type and LTV:

1-unit principal residence: No minimum borrower contribution required, regardless of LTV. The entire down payment can come from gift funds.
2-4 unit principal residence and second homes with LTV above 80%: The borrower must contribute at least 5% from their own funds. Gift funds can supplement but not replace the borrower's own assets.
Investment properties: Gift funds are not allowed. Per B3-4.3-04, gifts apply only to principal residence and second home transactions.

This distinction catches brokers in two ways: assuming gift funds can cover 100% of the down payment on multi-unit properties, and assuming gifts are available for investment properties at all. Check Selling Guide B3-4.3-04 for the full matrix.

For more Fannie Mae guideline breakdowns, see the Agency Guidelines series. For a broader pre-submission checklist, see file readiness best practices.

This article is for informational purposes only and is not professional advice. Always verify against current guidelines before making decisions.