When purchasing a home, one of the biggest hurdles for many people is coming up with a down payment. However, lenders understand that not everyone has the means to save thousands of dollars for a down payment. That’s where a gift letter for a home loan comes in.
In this article, we’ll explore what a gift letter is, why lenders care about it, who can gift money for a mortgage down payment, and how much money you can receive as a gift for a mortgage.
What Is a Gift Letter for a Home Loan?
A gift letter for a home loan is a written statement that confirms funds given to a borrower for a down payment are a gift rather than a loan that has to be repaid. This letter serves as proof to the lender that the funds are not a loan, which could affect the borrower’s ability to repay the mortgage.
The gift letter must include specific details such as who is gifting the money, where the donor’s funds are coming from, and the relationship between the donor and the recipient.
Why Lenders Care About Gift Letter Information?
Lenders care about gift letter information because it provides them with important details about the borrower’s financial situation and the source of the down payment funds.
By requiring a gift letter, lenders can ensure that the funds are truly a gift and not a loan that would affect the borrower’s ability to make mortgage payments. It also helps prevent fraudulent activities and money laundering in the mortgage industry.
Example of a Gift Letter for a Home Loan
Here is an example of what a gift letter for a home loan might look like:
[Date]
Dear [Lender’s Name],
I, [Donor’s Name], am writing this letter to confirm that I am gifting [Recipient’s Name] a sum of [Amount of Money] as a gift for their down payment on the purchase of [Property Address]. The funds are coming from my personal savings account, which I have diligently saved over the years.
[Recipient’s Name] is my [Relationship to Donor], and I am more than happy to provide them with financial assistance to help them achieve their dream of homeownership. I understand that the funds will be used solely to purchase the aforementioned property and will not be repaid in any form.
I have attached proof of the funds in my savings account, including bank statements and the transaction history. I am also willing to provide any additional documentation or information that may be required to verify the source of the gift.
Please let me know if there is any further information or documentation needed to complete this gift letter. I am available at [Donor’s Contact Information] if you have any questions or concerns.
Thank you for your attention to this matter.
Sincerely,
[Donor’s Name]
Who Can Gift Money For A Mortgage Down Payment?
There are certain guidelines regarding who can gift money for a mortgage down payment. Here are some common sources of gift funds:
- Family Members: Parents, grandparents, siblings, and other close relatives can provide gift funds for a mortgage down payment.
- Spouse or Domestic Partner: If you are married or in a domestic partnership, your spouse or partner can gift you the funds for a down payment.
- Friends: In some cases, close friends may be able to gift money for a mortgage down payment. However, lenders may require additional documentation to verify the relationship and the source of funds.
- Employer: Some employers offer down payment assistance programs or employer-assisted housing programs that provide gift funds for employees.
How Much Money Can You Receive As a Gift for a Mortgage?
The amount of money you can receive as a gift for a mortgage depends on various factors, including the type of mortgage loan, your financial situation, and the lender’s guidelines. In general, most mortgage programs allow gift funds to cover the entire down payment. However, some programs may have restrictions on the amount of gift funds that can be used.
It’s important to discuss your specific situation with your lender to determine the maximum amount of gift funds you can receive. Your lender will also provide guidance on the documentation required to prove the source and legitimacy of the gift funds.
Free Gift Letter Template for Home Loan!
Get our gift letter template for home loans in Word to simplify the documentation process for gifted funds. This template includes all the necessary details to meet lender requirements, ensuring a smooth approval process.
Perfect for homebuyers and donors, it provides a professional format to clearly outline gift terms and support your home loan application.
Gift Letter Template for Home Loan – Word
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