Whoever told you gift funds are capped at 5% on a conventional loan was working from outdated information. Under current Fannie Mae and Freddie Mac guidelines, a one-unit primary residence has no minimum contribution from your own funds and no cap on gift money: the entire down payment, closing costs, even reserves can come from a gift. Decades ago borrowers had to put in some of their own money first; that requirement is gone for this scenario. (A minimum borrower contribution can still apply on a two-to-four-unit primary or a second home at higher loan-to-value, so confirm the rule for your specific purchase.) On the tax side, there are typically no consequences for either party at the time of the gift: - You don't pay income tax on money you receive as a gift. - Your family member doesn't pay tax to give it, since it's already after-tax money. - A gift above the annual per-person exclusion reduces the giver's lifetime estate-tax exemption, which is large enough that this is a non-issue for the vast majority of families. Those thresholds change over time and depend on the giver's overall estate, so have them confirm the current numbers with a CPA. What the lender does care about: a signed gift letter and a clear paper trail on the funds.