Can earnest money be a gift?

Often, yes, but your lender has to be able to document it. Fannie Mae allows gift funds from an acceptable donor, such as a relative, for the down payment and closing costs, which earnest money counts toward. The gift needs a signed gift letter and proof of the transfer.

Under Fannie Mae's rules, the gift letter states the amount, says no repayment is expected and gives the donor's name, address, phone number and relationship to you. The lender also checks that the money moved from the donor to you or to the closing agent. Donors cannot be an interested party to the sale, such as the builder or a real estate agent.

FHA, VA and other loan programs have their own gift rules, and lenders can add requirements. Ask yours before the money moves. The guide on how to pay earnest money covers keeping a clean paper trail.