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

Jessica
Author:
Community Mentor
Rate This Article:
(Rated 5 by 5004 viewers)



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.
Last updated on August 4, 2014

Latest Community Discussions
My friend is about to close on a new house, but the old one has yet to go under contract. I will be giving them the funds required for ...

posted on 2011-09-28 01:11:51
Hi....I'm 2 weeks away from closing. My mother signed the gift letter for the amont of $500.00, but decicied after the fact she want to...

posted on 2011-06-11 20:19:39
I'm Trying to buy a house from my in-laws, and wanted to know if i can use a gift letter from them, to get the equity out of the house ...

posted on 2011-01-05 11:25:54
Some funds in my account were a gift from my brother. I do not need, and will not be using these funds for my mortgage down payment bu...

posted on 2010-12-11 06:50:11
My husband and I are under contract on a house, part of our downpayment/closing funds are coming from my mother, as she is repaying a l...

posted on 2010-12-09 23:02:01


Latest Questions & Answers
Category: Mortgage Basics
posted on 2012-03-14 10:28:14
Category: Mortgage Basics
posted on 2012-01-09 21:20:10



Ask question to Author
Subject
Image Verification


Can't read the image? click here to refresh
Message body
Author Message
anonymous1

Guest






0.10 Dollars($)

Post     Post subject: mortgage gift letter

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
image
Mini Profile  blue
blue



Joined: 21 Oct 2005
Posts: 1130
Location: MARYLAND

137.76 Dollars($)

Post     Post subject:

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
image
Charles A.

Guest






0.10 Dollars($)

Post     Post subject: Mortgage gift letter

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




Joined: 27 Jun 2007
Posts: 3322


474.68 Dollars($)

Post     Post subject:

Hi Charles.

Welcome to the forum.

Yes it should be the loan number of your daughter.
image
Mini Profile  gmakerley
gmakerley
Community Mentor
Community Mentor

best lender badge
Joined: 09 Nov 2007
Posts: 12377
Location: bloomfield, ct

58.69 Dollars($)

Post     Post subject:

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.

_________________
George M. Akerley
Mortgage Consultant
Word of Excellence- Writing/Editing/Proofreading
image
Howard

Guest






0.10 Dollars($)

Post     Post subject: tax?

Are there any tax implications? Do you have to pay any sort of gift tax?
image
Mini Profile  Samantha
Samantha
Community Mentor
Community Mentor


Joined: 16 Sep 2005
Posts: 1609
Location: MASSACHUSETTS

150.93 Dollars($)

Post     Post subject: RE: tax for receiving gift funds

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

_________________
Know how to compare lenders with mortgage booklet
image
ab

Guest






0.10 Dollars($)

Post     Post subject: gift money verification?

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?
image
Mini Profile  Niicss
Niicss



Joined: 03 Oct 2005
Posts: 5499
Location: New Jersey

601.94 Dollars($)

Post     Post subject:

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.

_________________
Good is the Enemy of Great.
image
Mike J

Guest






0.10 Dollars($)

Post     Post subject: gift

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?
image
Mini Profile  Niicss
Niicss



Joined: 03 Oct 2005
Posts: 5499
Location: New Jersey

601.94 Dollars($)

Post     Post subject: gift letter for mortgage downpayment

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.

_________________
Good is the Enemy of Great.
image
Angie

Guest






0.10 Dollars($)

Post     Post subject: gift letter for mortgage down payment

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.
image
Mini Profile  jameshogg
jameshogg



Joined: 20 Dec 2005
Posts: 12160
Location: Nevada

1221.50 Dollars($)

Post     Post subject:

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
image
Mini Profile  eric1
eric1
Community Expert
Community Expert

best lender badge
Joined: 04 Jan 2009
Posts: 1516


227.77 Dollars($)

Post     Post subject:

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.

_________________
Eric JLow Down Payment, No PMI !
FHA RATE QUOTE
Mortgage Rate Quote
image

1, 2, 3, ... 11, 12, 13  Next  
Page 1 of 13

 

Page loaded in 1.049 seconds.