Understanding Gift Letters for Mortgages
A gift letter is a crucial document when a homebuyer receives funds as a gift for their down payment or closing costs. Lenders require this letter to verify the source of the funds and ensure they are not a loan in disguise. This helps them assess the borrower’s true financial stability and reduces the risk of future repayment issues. Accurate and compliant gift letters can significantly impact your loan approval.
The gift letter must explicitly state that the funds are a gift with no expectation of repayment. It should also include key information about the donor and recipient, the amount of the gift, and the relationship between the parties. Following these guidelines and the examples below will make the process easier for you and the lending institution involved.
8 Sample Gift Letters
Here are 8 examples of gift letters, covering various scenarios. Remember to tailor these to your specific situation.
Sample 1: Standard Gift Letter for Down Payment
[Lender Name]
[Lender Address]
Subject: Gift Letter for [Borrower’s Name]
Dear [Lender Name],
This letter confirms that I, [Donor’s Name], am gifting $[Amount] to [Borrower’s Name] to be used towards the down payment on their home located at [Property Address].
This is a bona fide gift, and there is no expectation of repayment. I am [Donor’s Relationship to Borrower].
My address is [Donor’s Address], and my phone number is [Donor’s Phone Number].
Sincerely,
[Donor’s Signature]
[Donor’s Printed Name]
Sample 2: Gift Letter from Parent to Child
[Lender Name]
[Lender Address]
Subject: Gift Letter for [Child’s Name]
Dear [Lender Name],
I, [Parent’s Name], am gifting my child, [Child’s Name], the amount of $[Amount]. These funds are to be used for the purchase of a home located at [Property Address].
This is a gift with no obligation for repayment. I am the parent of [Child’s Name].
My address is [Parent’s Address] and my contact number is [Parent’s Phone Number].
Sincerely,
[Parent’s Signature]
[Parent’s Printed Name]
Sample 3: Gift Letter from Grandparent
[Lender Name]
[Lender Address]
Subject: Gift Letter for [Grandchild’s Name]
Dear [Lender Name],
I, [Grandparent’s Name], am providing a gift of $[Amount] to my grandchild, [Grandchild’s Name], to assist with the purchase of a home located at [Property Address].
This is a genuine gift, and there are no expectations for it to be repaid.
You can reach me at [Grandparent’s Address] or [Grandparent’s Phone Number].
Sincerely,
[Grandparent’s Signature]
[Grandparent’s Printed Name]
Sample 4: Gift Letter from Sibling
[Lender Name]
[Lender Address]
Subject: Gift Letter for [Sibling’s Name]
Dear [Lender Name],
I, [Sibling’s Name], am gifting my sibling, [Sibling’s Name], the amount of $[Amount] to use towards the purchase of a property at [Property Address].
This is a gift, and there is no expectation of repayment. I am the sibling of [Sibling’s Name].
My address is [Sibling’s Address] and my contact number is [Sibling’s Phone Number].
Sincerely,
[Sibling’s Signature]
[Sibling’s Printed Name]
Sample 5: Gift Letter for Closing Costs
[Lender Name]
[Lender Address]
Subject: Gift Letter for [Borrower’s Name] – Closing Costs
Dear [Lender Name],
I, [Donor’s Name], am providing $[Amount] as a gift to [Borrower’s Name] to cover closing costs associated with the purchase of their home located at [Property Address].
This is a genuine gift with no strings attached. I have no expectation of repayment for these funds. I am [Donor’s Relationship to Borrower].
My address is [Donor’s Address], and my phone number is [Donor’s Phone Number].
Sincerely,
[Donor’s Signature]
[Donor’s Printed Name]
Sample 6: Gift Letter with Source of Funds
[Lender Name]
[Lender Address]
Subject: Gift Letter for [Borrower’s Name] – Source of Funds
Dear [Lender Name],
I, [Donor’s Name], am gifting $[Amount] to [Borrower’s Name], for use towards a down payment on the property located at [Property Address].
These funds are a gift and do not require repayment. The source of these funds is [Source of Funds – e.g., Savings Account, Investment Account] at [Bank Name], account number [Account Number (Last 4 Digits)].
I am the [Donor’s Relationship to Borrower] of [Borrower’s Name]. My address is [Donor’s Address], and my phone number is [Donor’s Phone Number].
Sincerely,
[Donor’s Signature]
[Donor’s Printed Name]
Sample 7: Gift Letter with Bank Statement Attached
[Lender Name]
[Lender Address]
Subject: Gift Letter for [Borrower’s Name] – With Attached Statement
Dear [Lender Name],
This letter confirms that I, [Donor’s Name], am gifting $[Amount] to [Borrower’s Name] to assist with their purchase of the property located at [Property Address].
This is a gift and no repayment is expected. A copy of my bank statement showing sufficient funds is attached to this letter. I am the [Relationship to Borrower] of [Borrower’s Name].
My address is [Donor’s Address] and I can be reached at [Donor’s Phone Number].
Sincerely,
[Donor’s Signature]
[Donor’s Printed Name]
Sample 8: Simple Gift Letter
[Lender Name]
[Lender Address]
Subject: Gift Letter for [Borrower’s Name]
Dear [Lender Name],
I, [Donor’s Name], am gifting $[Amount] to [Borrower’s Name] towards the purchase of their new home. This is a gift with no expectation of repayment. I am [Donor’s Relationship to Borrower].
Sincerely,
[Donor’s Signature]
[Donor’s Printed Name]
Key Takeaways and Best Practices
These gift letter examples demonstrate the essential components required for mortgage approval. Ensure your letter clearly states the gift amount, donor and recipient information, the property address, and most importantly, that the funds are a gift with no repayment obligation. Always consult with your lender to confirm their specific requirements and avoid any delays in the loan process. Providing transparent and accurate documentation is key to a smooth transaction.