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.
Have you ever heard of the bank having to sign a gift letter to verify the funds in the account?
can't say i know about that, rbar...banks don't sign gift letters. can you elaborate at all?
RBAR
I know that banks look for verification that the funds have been transferred to the borrower. Maybe you are referring to the borrower's bank? The one where he/she keeps the savings account and not the bank that is approving the loan?
I know that banks look for verification that the funds have been transferred to the borrower. Maybe you are referring to the borrower's bank? The one where he/she keeps the savings account and not the bank that is approving the loan?
do we need to have the gift money for down payment to be in our bank
before getting pre approve???
thanks
before getting pre approve???
thanks
no you do not anonymous - simply inform your loan officer of the impending gift. it will need to be verified prior to your receiving the authority to close on your mortgage.
This is sooo confusing, I asked couple of realtors & lenders and half say it's good that the gift money is in our bank.
Half said that it's okay to get pre approve.
Do you advice to get pre qualify first or pre approve is much better & quicker???
thanks again
Half said that it's okay to get pre approve.
Do you advice to get pre qualify first or pre approve is much better & quicker???
thanks again
preapproval is better - it means that the lender actually looked at and verified your income, assets, debts, etc. and that you'll get an approval based on what they've analyzed.
as for the gift money...it really won't make a whole lot of difference in the long run when you deposit it - as long as it's there when it's needed.
ask a few more "experts" and you'll get a few more answers to confuse you, too. each of us has our own little habits and preferences, and those come into play when we answer these questions.
as for the gift money...it really won't make a whole lot of difference in the long run when you deposit it - as long as it's there when it's needed.
ask a few more "experts" and you'll get a few more answers to confuse you, too. each of us has our own little habits and preferences, and those come into play when we answer these questions.
If my mom will give me $15,000.00 to buy a house, Do we need to split the amount to deposit it like 5,000 at a time every week so that it
will not have a red flag to IRS?
Again your very helpful,
Thank you
will not have a red flag to IRS?
Again your very helpful,
Thank you
$5000 each week for 3 weeks is equivalent to $15000 all at once. you don't need to worry about "red flags" to the irs.
So does my mom or Myself needs to pay any tax for this amount of gift?
Thanks
Thanks
that's a tax question and i have no expertise in that area. my advice on that is to check with a tax accountant or directly with the irs.
My wife and i celebrated our anniversary two days ago. We were given 2500 total from two sets of relatives. We are also under contract for a house which will close in 38 days. Do i have to have a gift letter for these anniversary gifts?
My son is buying his first house and we deposited $4400 into his account for the downpayment about two weeks ago. The agreement between us is that he will pay us back when he gets the $8000 government tax credit for first-time home buyers after filing his income taxes. We are charging no interest, and, if he would renig on the loan, we wouldn't "go after" him, legally. Yesterday, we got a gift letter from his mortgage comapny and are now wondering what to do. We had NO idea this was the situation, don't feel comfortable signing a gift letter for money that is not intended to be a gift but don't want to prevent him from getting his mortgage loan either. The money has already been given, the house (twin home) is near completion, the closing is set for mid November. If we sign the gift letter and our son pays us back, as we had initially planned, will we be in trouble? In addition, we, of course, did not intend to declare this money as a gift on our own income taxes as it was never intened to be a gift nor would there be any interest income to declare as we are not charging interest. We had NO idea this would come up and are very unsure how we should handle it at this point. Any advise you can give will be greatly appreciated!
I should correct and, perhaps, add to my post above. The $4400 was for closing costs rather than down payment, I believe.....probably doesn't matter. We live in MN, he lives in ND. He called us, told us how much they (son and daughter-in-law) needed and how they intended to pay us back, we sent the check directly to his bank and forgot about it....until we got this gift letter in the mail, which we're supposed to return ASAP. What sounded so simple.....a small loan between parent and child.... has turned into a perplexing, uncomfortable, complicated transaction.
Hi,
My wife and I are closing in 30 days on an apartment with 30% down. We are very close to having the right amount, however, it looks like we may be short by around 2k. I have a painting that I bought recently and it is worth $2000. Could I sell it in the next couple of weeks and use that money towards closing costs?
Thanks in advance!
My wife and I are closing in 30 days on an apartment with 30% down. We are very close to having the right amount, however, it looks like we may be short by around 2k. I have a painting that I bought recently and it is worth $2000. Could I sell it in the next couple of weeks and use that money towards closing costs?
Thanks in advance!