What Is a Gift Letter for a Mortgage?
A Gift Letter for a Mortgage is a written statement prepared by the gift donor to support the mortgage borrower's claim that the funds used for the mortgage came from legitimate sources. If you do not have enough money to finance your mortgage and your relative, domestic partner, or close friend provides you with means you may apply to your down payment, it is necessary to document the gift source and record the name of the person whose generosity allowed you to take out a mortgage and live in the house or apartment of your choice.
- Mortgage Gift Letter.
For more Mortgage Gift Letter templates and samples you may check out our library below.
How to Write a Gift Letter for a Mortgage?
Follow these steps to draft a Gift Letter for a Mortgage Down Payment:
- Before you start writing a letter, ask the gift recipient if there is a specific Gift Letter template for a Mortgage you must fill out. The lender may require the borrower to prepare a document complying with all requirements and procedures of their financial institution - you may even consult with the lender directly.
- State your full name, the recipient's name, and specify your relationship to each other.
- Indicate the amount of the gift and your understanding that this money will be used to help the recipient with their mortgage. Note that there are no limits to the sum of money gifted for the mortgage or down payment in particular - however, consider tax consequences and consult with your spouse to see whether you can afford a gift without having to pay a gift tax later. If the parties to the existing or future mortgage already know which real estate will be financed, record the address of the house or apartment to be purchased.
- Write down the source of the gift - your bank account, investments, personal savings, etc. If necessary, attach a copy of a bank or financial statement to the letter.
- Certify you do not have any intentions to put a lien or any other encumbrance on the property even though your money has financed it. It protects the borrower and shows you do not expect any kind of compensation despite your contribution. Even the interest of the real estate agent that manages the sale and purchase of the property in question may be considered unacceptable if they provide the recipient with money for the down payment and later get a fee from the transaction.
- Add your contact details and offer the lender or their representative to get in touch with you if they find any issues or have further questions about your gift. It is enough to state a telephone number and an email address.
- Sign and date the letter. Ask the gift recipient where to send it - it may be required to mail the documentation to the specific loan officer. Alternatively, give the letter to the borrower - they will add it to their documents when negotiating and finalizing the mortgage.
Why Do You Need a Gift Letter for Mortgage?
Before any borrower signs the mortgage agreement with the lender, they must ask the financial institution about the documentation necessary to prove they have enough finances for the mortgage down payment. If you are being helped by your family member or close acquaintance to pay for the mortgage - whether this is a down payment or just a regular mortgage payment you will be asked to make in the future - you need to show you were gifted the money. Ask the giver to complete a Mortgage Gift Letter template to confirm they have given you their money, these funds did not come from somewhere illegal, and they do not want you to ever pay back the indicated sum.
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