One alternative to gifting money is to make a loan to a recipient so it would be repaid in case a couple divorces (a down payment becomes a commingled asset when it's used to buy a home). "A lot of times, parents prefer not to make gifts upfront," List says. "They want to make sure the marriage works first." While the loan is in place, the relative would need to charge interest but could later forgive the loan and make it a gift. In a family loan scenario, mortgage lenders would typically want assurance that the loan is subordinate to the mortgage, meaning the bank is repaid before the relatives.
Before gifting money for a down payment, it's a good idea to consult a certified public accountant to discuss how this might impact your taxes and other aspects of your finances. The homebuyer should also find out if the lender requires a certain amount of the down payment to come from the buyer and ask about documentation requirements.