Posted on: 08th Apr, 2004 11:37 pm
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.
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:
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.
- 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.
the gift letter states the donor doesnt have an interest in the house, but does that legally stop the donor from getting their money back from the borrower
money was given as a loan but u cant say that on the gift letter from the bank so what recourse do i have to collect my money
Hi Marshall!
Welcome to forums!
As the money was given to you as a gift, then it's very natural that the donor will not ask you to repay it. If it wasn't given as a gift, then the donor can ask the person to pay it back. If there is an agreement between you and the person, then it will be easier for you to get back your money.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
As the money was given to you as a gift, then it's very natural that the donor will not ask you to repay it. If it wasn't given as a gift, then the donor can ask the person to pay it back. If there is an agreement between you and the person, then it will be easier for you to get back your money.
Feel free to ask if you've further queries.
Sussane
i have a home with an adjustable rate mortgage that is $100,000 underwater. i would like to use money from my mother's home equity line to pay off the negative equity so that i can refinance into a fixed rate 30 year loan. i would then make the payments on her home equity loan and my new mortgage and the total would be slightly lower than i currently pay with no risk of higher rates in the out years.
my mortgage broker is saying that she will need to wire the funds to the escrow account of the title company handling the closing, and provide a gift letter. i do not want to be in a position of reporting the "gift" as income and paying taxes since it is far above the annual exemption. is this something i should speak to a tax professional about? would a separate document between my mother and i stating that the money is a loan and that i will make the payments to her bank sufficient to deal with the irs?
my mortgage broker is saying that she will need to wire the funds to the escrow account of the title company handling the closing, and provide a gift letter. i do not want to be in a position of reporting the "gift" as income and paying taxes since it is far above the annual exemption. is this something i should speak to a tax professional about? would a separate document between my mother and i stating that the money is a loan and that i will make the payments to her bank sufficient to deal with the irs?
Welcome Nathaniel,
If you take the money from your mother, it will be considered as a gift on her part and she may be responsible for paying gift taxes. She should speak to a tax professional and check out if she can avoid it.
If you take the money from your mother, it will be considered as a gift on her part and she may be responsible for paying gift taxes. She should speak to a tax professional and check out if she can avoid it.
Hi,
My husband and I are about to close on our first house. We are finding that we are running a bit short on the down payment. My husband's parents said that they would take out a small loan and gift it to us and we said we would pay them back. Is this not an "ok" thing to do? Should we throw caution to the wind on this?
My husband and I are about to close on our first house. We are finding that we are running a bit short on the down payment. My husband's parents said that they would take out a small loan and gift it to us and we said we would pay them back. Is this not an "ok" thing to do? Should we throw caution to the wind on this?
Gift money if going on the loan together? Are the money taxable?
My parents and I are going on the loan together to buy a house. We should be all on the title when the deal is complete. My parents contributing about $70,000 and I am doing about the same. The bank wants us to fill out a gift letter, from my parents to me.
Why do I have to do that if both of us are going to be on the loan together? What are the implications on mine and their tax returns in 2010? How much taxes will be taken from them or me because of this transaction?
Thank you for answering.
My parents and I are going on the loan together to buy a house. We should be all on the title when the deal is complete. My parents contributing about $70,000 and I am doing about the same. The bank wants us to fill out a gift letter, from my parents to me.
Why do I have to do that if both of us are going to be on the loan together? What are the implications on mine and their tax returns in 2010? How much taxes will be taken from them or me because of this transaction?
Thank you for answering.
hi guest,
as you'll have to return the money to your husband's parents, it will be a sort of second mortgage on your property. the lender may not agree to such a thing. if your husband's parents gift the money to you and if you won't have to pay it back, then the lender can agree to give you a mortgage.
to zami,
if your mother gifts you the money, then she will be liable for paying gift taxes. however, there is an annual gift tax exemption of $13,000 and life time gift tax exemption of $1 million. she can take advantage of any of these exemptions and won't have to pay any taxes.
thanks
as you'll have to return the money to your husband's parents, it will be a sort of second mortgage on your property. the lender may not agree to such a thing. if your husband's parents gift the money to you and if you won't have to pay it back, then the lender can agree to give you a mortgage.
to zami,
if your mother gifts you the money, then she will be liable for paying gift taxes. however, there is an annual gift tax exemption of $13,000 and life time gift tax exemption of $1 million. she can take advantage of any of these exemptions and won't have to pay any taxes.
thanks
1st what are the tax implications if someone gives a gift of say $50K to be used as a down payment.
2nd, this is for my daughter but she is not part of the mortgage so the gift would probably be coming to me, her step-father. How is that done?
Thanks,
2nd, this is for my daughter but she is not part of the mortgage so the gift would probably be coming to me, her step-father. How is that done?
Thanks,
Hi Guest!
Welcome to forums!
The person giving the gift will be liable for paying gift taxes. As the gift will be given to you, then you will be responsible to get a gift letter from the person giving you the gift and submit it to the lender.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
The person giving the gift will be liable for paying gift taxes. As the gift will be given to you, then you will be responsible to get a gift letter from the person giving you the gift and submit it to the lender.
Feel free to ask if you've further queries.
Sussane
I have a question all, My exfiance and I got a house in 2009. My ex fiance had to sign a gift letter in order for the loan to go through that was completely in my name. He didnt want to be on the paperwork. He didnt want his credit to be ruined. So he signed a gift letter of 65,000 be gifted to me as a down payment for the loan. We also share a child together. We broke it off last summer of 2010 due to his insanity and violence, so i got a restraining order. Yesterday I recieved a letter from a lawyer stating he wants to be put on the deed of the house or I have to repay that money of 65,000. The bank never needed the gift letter notorized or asked in a since. Will it affect me in court and will they ask me to repay it, with the gift letter not being notorized??? I am worried for our daughter and I now. Does he have a chance of winning??
Hi Guest,
If he has gifted you the money, I don't think you will be liable for paying it off. However, there are chances that you might be asked to add him to the property deed.
Thanks
If he has gifted you the money, I don't think you will be liable for paying it off. However, there are chances that you might be asked to add him to the property deed.
Thanks
My family has been giving me miscelaniouse cash to deposit in my account, for the closing costs on a home I'm trying to buy. My mortgage company failed to inform me you cant hav cash deposits in youre account that aren't accounted for with some kind of paper trail.I hav numerouse cash deposits from $200 to $1,000 dollars The damage is already done what can I do?
Hi Manny,
You should contact a real estate attorney and he/she will be able to guide you in this matter. It is true that you will have to provide the lender with a gift letter in order to justify the cash deposits.
Thanks
You should contact a real estate attorney and he/she will be able to guide you in this matter. It is true that you will have to provide the lender with a gift letter in order to justify the cash deposits.
Thanks
I was asked to write a gift letter to my cousin and also to my sister, will there be a problem if an escrow company receives multiple gift letters from the same person to different individuals? the same title company is handling both loans.
thanks
thanks