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.
Hi anna,
If it is a gift money, then he won't be liable for paying it back. If you want to secure the money, you can ask him to include your name to the property deed. Thus, you would become one of the owners of the property. In future, if the property is sold off, then you would get your share of the money.
Thanks
If it is a gift money, then he won't be liable for paying it back. If you want to secure the money, you can ask him to include your name to the property deed. Thus, you would become one of the owners of the property. In future, if the property is sold off, then you would get your share of the money.
Thanks
I am buying a home and my father is gifting me $25k. I wanted to pay back a $14k, 401k loan and then take out a total of $22 from my 401k. Is that a smart thing to do?
Welcome misuarez,
You can take out a loan from your 401k account. However, if you default on a 401k loan and haven't reached the age of 59 1/2, the IRS will treat the loan as an early distribution which would be subject to income taxes as well as an additional 10% early withdrawal penalty.
You can take out a loan from your 401k account. However, if you default on a 401k loan and haven't reached the age of 59 1/2, the IRS will treat the loan as an early distribution which would be subject to income taxes as well as an additional 10% early withdrawal penalty.
How to write a letter to mention that I don't have any relationship with the seller
Hi nena,
An attorney can guide you in writing the letter which states that you don't have any relationship with the seller.
Thanks
An attorney can guide you in writing the letter which states that you don't have any relationship with the seller.
Thanks
If someone has written a cheque for the deposit on a condo, why would the mortgage lender (bank) ask for a gift letter?
Hi nova,
The lender shouldn't ask for a a gift letter if you've given a check for the deposit on a condo unless you received the money as a gift from someone else. You should contact your lender and ask to clarify as to why he needs the gift letter.
Thanks
The lender shouldn't ask for a a gift letter if you've given a check for the deposit on a condo unless you received the money as a gift from someone else. You should contact your lender and ask to clarify as to why he needs the gift letter.
Thanks
Would I need a gift letter if I want to purchase a home for cash and my father is gifting me the money?
Would that be proof of funds as asked for in a contract to purchase?
Would that be proof of funds as asked for in a contract to purchase?
Hi Buyer,
You're not taking out a loan but purchasing the property for cash. In that case, you won't need a gift letter.
Thanks,
Jerry
You're not taking out a loan but purchasing the property for cash. In that case, you won't need a gift letter.
Thanks,
Jerry
what kind of relations do u have to be to the donor. brother, sister, mom, dad etc
You should have blood relations with the donor in order to gift money to the said person.
people dont wont to sign the paper work because it say that no re-payment has to be made-and they want there money back if they give a loan
my mother recently passed away and three years ago she gifted me 44,000 as a down payment for a home for my disabled son. now my brother wants half of it because he believes it should be part of his inheritance. do i need to give him half even if she wrote a gift letter to the bank??
MY MOTHER WROTE MY FIANCE AT THE TIME A MORTGAGE GIFT LETTER IN THE AMOUNT OF $10,000 FOR THE DOWN PAYMENT OF OUR HOME. NOW ALMOST 5 YEARS LATER SHE SAYS SHE EXPECTS US TO PAY IT BACK WHT SHOULD I DO?
Hi anonymous2,
If your mother had written a gift letter and given the money to you, then your brother cannot claim inheritance to that amount.
To anonymous BOB,
If the money was given to you as a gift, then she shouldn't claim it back from you. However, if it was given to you as loan, then you should pay it off to that person.
If your mother had written a gift letter and given the money to you, then your brother cannot claim inheritance to that amount.
To anonymous BOB,
If the money was given to you as a gift, then she shouldn't claim it back from you. However, if it was given to you as loan, then you should pay it off to that person.