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Mortgage Gift Letter - What is it and how to write it?

Mortgage Gift letter is what the donor of the gift writes to the lender stating that he has offered a gift of money to the home buyer.

Homebuyers often require extra funds to make their down payment or pay part/whole of their closing costs when there is shortage of cash to pay for these upfront costs. They can borrow from a non-profit organization but lenders often do not prefer borrowed money as the down payment. In this situation, cash gift from family members is very helpful.

When a gift is made available to a homebuyer applying for a mortgage, he needs to write a mortgage gift letter signed by the donor and attach it with the loan application form. At times, the lender may also provide the buyer with a Gift Letter form which the latter only needs to fill out.

However, if the gift is made by any non-family member such as friend, employer, etc, then a borrower needs to provide documentation of a very close and long lasting relationship.

How to write Mortgage Gift letter

A mortgage gift letter includes the following:
  • Name of donor of the gift
  • Name of the recipient
  • Relationship between the donor and recipient
  • Cash amount gifted
  • Address of the property for which gift is made
  • Source of the funds (bank account, brokerage account etc) as offered by the donor.

Apart from the above, the gift letter should also state that the buyer need not repay the gift amount. Also, the lender should be assured that the gift funds were not made available to the donor from any person involved with the sale of the property including the seller, broker, real estate agent, loan officer or builder etc.

With gift of money, a buyer can afford to purchase a bigger house. At the same time, he can borrow less and thus reduce his monthly payments. However, the homebuyer needs to provide a written statement and prove that the money he's putting down is a gift. Here's where a mortgage gift letter serves its purpose.

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I want to know that if the price of the house is $320,000 and a gift letter is given for $40,000 does this lower the price of the initial loan? Or does the loan amount stay at $320,000

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blue's picture
blue | Joined: October 21, 2005 09:17 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

Mortgage gift letter is a letter from a family member verifying that he/she has given the borrower a certain amount of money (for you $40,000) as a gift and there is no need to return it.

That can certainly bring down the loan amount as you can use that money towards a portion of your down payment through some mortgage products.

Blue

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

On this gift letter, there is a line for a loan #. Would this be the loan number of my daughters loan. Thank you.

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Charles.

Welcome to the forum.

Yes it should be the loan number of your daughter.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

charles (and others): you'll likely never have to worry about the loan number. for one thing, those things often change; for another, most borrowers don't know the loan number early on in the process. lots of times, they're not given to a borrower until closing (and who's paying attention then?).

as for a $40K gift on a $320K purchase; that would allow a borrower to reduce the loan amount as low as $280K. an alternative is to use most of the gift money for down payment and the rest of it for closing costs. this, of course, would result in a higher loan amount than the $280K noted, but would alleviate the need to liquidate other funds to cover the closing.

the beauty of a gift is that it allows a borrower some flexibility in how funds are allocated.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Are there any tax implications? Do you have to pay any sort of gift tax?

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Howard,

You may have to pay gift tax on the funds you receive as gift from any family member or anyone provided the gift amount doesn't exceed $12,000 and you don't qualify for the gift tax exemptions. It's always advisable to check this out with a CPA or financial advisor.

Hope this helps...

god bless you.

samantha

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Does the person donor of the gift money has to provide a bank statement to the loan officer to show that the donor has the money to give?

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi ab!

The donor of the gift has to provide the lender with a bank statement to show that the donor has the ability to give the money.

Thanks.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

does the buyer need to tell the seller of the gift? Who needs to know about the gift? Is this between the buyer, giver of the gift and the buyers lender?

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Mike J

As far as I know, the buyer of the property will have to inform the lender about the gift letter. You may or may not inform the seller about the gift.

Thanks.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I have given $20000 for the downpayment of a house .I signed a gift letter with no terms or repayment required just to show the lender.The borrower didnt sign any document to pay me back but said as soon as his situation improves he will pay me the sum withou any interest. If he doesnt pay me will I have any way of getting my money back.

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Angie,

As there is no agreement between you and the borrower, I don't think you have much chance of getting back the money if the borrower does not pay the money to you.

Thanks

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eric1's picture
eric1 | Joined: January 4, 2009 03:52 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Angie,

To add insult to injury, you signed a document that says the money is a "Gift". As a result, you would have no leg to stand on in court. Your best bet is to reason with this person and use some other type of measures to get your money back.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If we are being given $10,000 as a gift for our down payment, do we have to use all of the money on a down payment? On the gift letter, it asks how much money is given. What if we are able to make a smaller down payment and choose to use the rest for fixing things how would we write that on a gift letter?

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eric1's picture
eric1 | Joined: January 4, 2009 03:52 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

The lender should have a gift letter that you can fill in. Most of them do not require you to state exactly what you are using those funds for. Typically people use them for a combination of down payment and closing costs. many banks require that you have some funds of your own in addition to the gift funds.

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m.snover92571's picture
m.snover92571 | Joined: February 10, 2009 09:53 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Does this actually lower the loan amount?

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eric1's picture
eric1 | Joined: January 4, 2009 03:52 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

No it does not lower the loan amount unless the gift allows you to put more down on the home. The gift is down payment money or a combination of down payment and closing costs.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I'll make this quick.... Ex and I broke up, sold the house. In order to obtain our mortgage her mother gave us X amount if money and the three of us signed a gift letter. Now she wants to take me to court to get half of it back plus interest as she took the cash from her line of credit. She claims that a gift letter does not re-characterize the loan into a gift. Anyone know if there's any truth behind this? Am I screwed?

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eric1's picture
eric1 | Joined: January 4, 2009 03:52 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

If all she has is the signed gift letter, then technically you do not owe her the money unless you signed a seperate document indicating that you WOULD repay her with interest.

This will all come down to your morals. Whether you believe you owe the money. If you got that money back after the sale of the home, then the right thing to do would be to return your portion to her.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

the idea of "gift" is precisely that - money (or other goods) given for which no repayment is expected, or required. now, we all realize that in working with borrowers in the mortgage industry, there are some whose gifts are, in fact, loans; but masquerading as gifts so as to comply with specific guidelines that allow loans to be approved.
as eric noted, if a gift is proferred and the home is subsequently sold, especially in a case where there's a breakup in a relationship, one might feel a moral compulsion to repay the portion of the gift that came from the other partner's parent or family member. again, unless there is some sort of legal documentation that requires repayment of this "gift" then there'd be no legal need to repay it.
how you handle this is up to you.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Although gift money can not be expected to be returned or implied, is there anything wrong with paying it back?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome anonymous,

There is nothing wrong in paying back the gifted money. But if you pay it back, then it will not remain a gift anymore.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

anonymous, i agree that there's nothing wrong with paying back a gift. often, i'm sure, people will realize an increase in their lives that allows them to repay what was truly a gift.

consider it a re-gifting. i think it's a lovely way to say thank you for the original gift. and, by the way, it would have no impact on your mortgage, as your repayment is (it sure seems to me) purely voluntary.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am gifting some money to my brother for a house, I don't expect it back. My brother said that the lender is asking for proof of where the gift is coming from. I know this may sound weird but I currently have it in a safety deposit box and not in an actual account. How do I "prove: where I am coming up with the funds??

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

eric, although i understand your desire to have your money "safe" that's not a good way to document funds you are giving as a gift to someone buying a home. the lender wants to see that you had the funds in the first place, in order to provide the gift. i'd hope that you can find a way to provide them with some sort of verification of where your funds came from, but bank account verification is by far the best method.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

So if I deposit this money into my personal account then just do a cashier's check or something??? Thanks fo rthe help.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We will be closing in a few weeks. Meanwhile some money is starting to come in from my Dad's estate from the sale of some of his household items. At this point in time if we put that $3,000 in our bank account do we have to prove were it came from?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome,

To Eric,

Yes, you can deposit the money in your personal account and then issue a check to your brother.

To Kid,

I think you are planning to use the money coming from your father's estate as a down payment towards the mortgage. In that case, you will have to show a document to the lender in order to prove where it came from.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Thanks Adonis!

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Can you have two sources of a gift letter? Half from one person and half from another?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

can my nephew gift me money for my mortgage?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

To just me... Yes, you will be able to submit two gift letters to your lender. I don't think that will be a problem.

To tlv...yes, your nephew can definitely gift you the money and you can use it as your down payment towards the mortgage.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

if i'm going to be on the deed of the house, but not on the mortage, because i'm paying my half up front do i need to do a gift letter, and if i do a gift letter what are my rights as far as getting my half of the morgage back if something happened between my fiance and myself

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi

You can pay the money and do a gift of letter to the lender. But if you do a gift of letter you are not supposed to ask for a repayment of the money you pay. However, if you are on the title to the property, you will be entitled to your share in the property, in case it is sold.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

My cousin signed a gift letter for $10,000 given to me. However, he is a bit insecure about providing his bank account information. So he took a screenshot of his bank account online that has all the account info and last 3-4 digits of his bank account. Will that be acceptable?

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eric1's picture
eric1 | Joined: January 4, 2009 03:52 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Every bank will handle that differently. Some may allow a screenshot and other may want a copy of the withdrawal out of his account and the deposit into your account.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Ok, my cousin made me a copy of his bank statement, but blanked out the first couple of numbers and left the last 4 digits of his account number visible. He will also be writing me a check from that account. Would that then be acceptable?

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi

I think this should be acceptable. But again, as Eric had said, this may vary from lender to lender. Some may accept it, while others may not. You need to check with your lender and see if they will accept this.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am putting a large down payment on a home so I can get a better rate. Do you think the mortgage company is going to want to know Where the money came from and if it was and gift or a loan??

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Brad,

The lender would surely want to know the source of the money you are putting down, especially since it is a large amount. They would want to make sure that you have not borrowed the amount from some other source to make the down payment on this loan because if you have incurred another debt for the downpayment it may affect your affordability of the loan.

Thanks,

Jerry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

I received money as a gift towards the purchase of a home. Due to the short length of time that it has been in my accounts, my lender is requesting a gift letter to verify the source of the money. The relative that gave the money is not asking for repayment and it is mine free and clear except that it was given in cash and the person would rather not sign a gift letter. Am I obligated to reveal my source or is it sufficient enough to give my bank a signed statement that the funds are just mine and that I have had it for awhile (held in cash)

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eric1's picture
eric1 | Joined: January 4, 2009 03:52 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

You really need to convince the relative to sign the gift letter. Your other option is to wait a month or two until you get two months' statements with the gift reflected in the balance. Then use a different bank for your loan.

I really dislike switching lenders like that, but if you cannot get the gift letter you may be left with no other option.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If I have already given my sister a check for $9000, why do I need to include my bank infomation on the Gift Letter?

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi

You need to provide your bank information in the gift letter so the lender can be sure that you indeed have given your sisiter the money and she has not borrowed the money from any other source. This is actually works as an evidence and convinces the lender that your sister has not incurred any further debts.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My father in law has gifted me and his daughter $50,000 for our home purchase. He lives in Indonesia and he does not feel comfortable revealing his bank statement to even his own daughter yet alone a loan company in the United States. He is super wealthy and of high class in Indonesia with several businesses and does not understand why "stupid" American company need to pry into his financial business. Is my only option to wait 2 months? We were already pre approved and a house we made an offer on is about to be approved in a week or so! Now the loan company is saying we need his bank statement and we can not get it! What do we do??

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi

If you're putting $50,000 as down payment, the lender would be curious to know about the source of the money. They just want to make sure that you haven't borrowed the money to make the down payment. You can discuss it with your lender and check if there is any other option for you. Otherwise, you'll have to convince your father in law and get his bank statement or arrange the down payment money from some other sources.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I recieved a gift from my parents, they used their credit card to give me the money, is that a problem

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi anonymous,

Your parents can definitely give you the money as a gift so you can make the down payment. However, they need to send the lenders a mortgage gift letter stating that they have gifted the money to you and you will not have to repay it. I don't think it matters to the lender whether they pay the money through a credit card or a check.

Thanks,

Jerry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If I list someone on my gift as family and they are not truly family, can we get into trouble? Also if it is over $13K do we both have to pay taxes on that? Do they have to pay income tax?

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