Buying a home already comes with a lot of paperwork to make your head spin. Then, if a parent, relative, or someone close to you is helping with the down payment, the lender may add more documents to the list: a gift letter.
Sounds complicated? But it is the only way to put the money arrangements in writing and give clarity on different things. For instance, who gave the money, how much they gave, and that you’re not expected to pay it back.
But what exactly comes in this letter? Luckily, you don’t need to do the guesswork, as our templates have all the details already. You only need to grab the right template and fill in the information without wondering, “Okay, but what exactly am I supposed to write here?”
What Is a Gift Letter?
Suppose your family member is helping you out with some money for your home purchase. Well, that’s great. But when a mortgage lender sees that extra cash, they’re naturally going to ask, “Where did this come from?” That’s where a gift letter comes in.
In other words, you can think of it as a simple paper trail for money. The donor uses the letter to confirm how they’re giving, who’s getting it, and most importantly, it’s a GIFT, not a LOAN that you’ll have to pay back later. In short, lenders use this information to check the source of funds and make sure everything checks out with the mortgage requirements.
What Information Goes in a Mortgage Gift Letter?
Before you reach the perfect t template, let’s break down the details that make this letter complete and easy to understand.
1. Donor information
First up is the person giving the money. Here, you need to put their full name, address, contact details, and relationship to the borrower. Basically, it is the part that answers, “Who’s being so generous?”
2. Borrower information
Next comes the part where you need to fill in the information about the person receiving the gift. Rightfully add the name, address, and, when required, details about the property or purchase. No mystery here; the lender should know exactly who the money is helping.
3. Gift amount
This one is important and a pretty straightforward section. Here, you need to disclose the exact amount being gifted. If needed, it is good to include the currency too, so there’s no room for a “Wait, how much was that again?” moment.
4. Statement that the money is a gift
This is the most obvious information that needs to be on the letter. It should clearly say that the money is a gift and does not need to be repaid. Transparent communication prevents the lender from confusing gifted funds with borrowed money.
5. Source of gift funds
Getting to know who is giving you the funds is one thing, but the lender also wants to know where the gift money is coming from. To include this information, you must attach the bank name, account details, and account type, such as checking or savings. Take it as showing the money’s starting point.
6. Signatures and dates
Finally, it’s time to make it official. The donor signs and dates the letter, while the borrower may also need to sign depending on lender requirements. By signing it, your gift letter is all set to join the mortgage paperwork pile.
Explore Our Gift Letter Templates
From simple letters for a mortgage application to a more detailed format for documenting gifted funds, we’ve got you covered. Let’s have a look at what comes in each template and when it can come in handy.
If you like to keep things clear and straight to the point, this template is a handy option when documenting a financial gift for a home purchase. Just like the standard one, it covers the gift amount, property details, and the relationship between the donor and purchaser, while also ensuring the money is a genuine gift and doesn’t need to be repaid. It also has a signature section which confirms both parties agree to what’s written in it.
Gift Letter Template 01
Gift Letter Template 02
Gift Letter Template 03
Gift Letter Template 04
Gift Letter Template 05
Gift Letter Template 06
Gift Letter Template 07
Gift Letter Template 08
This is a more specified version and gives both sides their own space, so there’s no confusion about who is giving the money and who’s receiving it. It has all the things that need to be on an authentic gift letter, such as donor and recipient details, property address, and gift amount. Plus, it also straightforwardly explains that money is a gift, not a loan.
Explore our editable template collection and choose the one that goes with your specific loan instructions.
What Makes a Gift Letter Acceptable to a Lender
Not every letter makes it to approval. A good template, for sure, helps you put the right information, but this is not enough. You may need to follow some official requirements:
1. Accurate information
This is a place where there’s no chance to write “close enough details”. All the information, from names and addresses to gift amounts, should be accurate and consistent with the documents supporting your application. In case the amount gifted doesn’t match the amount used during writing, an additional lender may be needed under applicable loan rules.
2. Clear gift language
Well, there is no room for a “Wait, is this actually a loan?” moment. It should clearly depict that it’s a GIFT. Fannie Mae particularly requires the donor’s statement that no repayment is expected, while Freddie Mac likewise demands the gift letter to state that funds do not have to be repaid.
3. Proper signatures
The signatures shouldn’t be an afterthought; in fact, this is what makes it official. Both sides should have signed and dated the document properly, as it is one of the core requirements of Fannie Mae.
4. Lender-specific requirements
Here’s come the big one: there isn’t a single gift lender rule that applies identically to every mortgage. Requirements may vary between conventional loans, FHA loans, VA loans, USDA loans, and individual lenders. That’s why CFBA specifically advises borrowers to ask their loan officers whether the gift funds are allowed with the loan they’ve chosen and take a look at all instructions.
Supporting Documents You May Need With a Gift Letter
The letter is a written arrangement, while supporting documents act as evidence to show the money trail. The exact requirements may vary, but under FHA guidance, these documents may be used to verify gifted funds.
| Documents | What It Helps Show |
|---|---|
| Donor Bank Statement | Shows that the donor had the funds available and, when required, the money was withdrawn from the donor’s account. |
| Proof of Transfer | Shows how the gift moved from the donor to the recipient or settlement augment, such as electronic transfers or official bank checks. |
| Borrower’s Bank Record | Helps show the gifted money was actually deposited into the purchaser’s account. |
| Additional Lender Documents | Based on the mortgage program and lender, you may need extra records to verify the source and transfer of the funds. |
Note: Don’t assume this is the final and same paperwork. Check the requirements for your specific loan program first.
Common Mistakes That Ruin Your Gift Letter
Templates are pretty straightforward to use, but a few slips-ups can turn into unnecessary back-and-forth with your lender. Here are some common mistakes worth catching before you hit submit.
- Leaving the Gift Amount Unclear: The letter is not a mystery or a guessing game. So, clearly state the actual or maximum gift amount to avoid any confusion between you and the lender.
- Forgetting the Property Information: Almost every template has space to write the property address or purchase details; make sure you fill this in. Moreover, this helps connect the gift to the home purchase rather than leaving the lender thinking where their money is gone.
- Providing Details that Don’t Match Bank Records: Most importantly, your gift letter and financial records should tell the same story. If the letter says one amount but the transfer or bank records show the opposite, expect some extra questions.
- Signing the Letter at the Wrong Time: Don’t leave signatures until the last possible second, or sign the document with incomplete information. Make sure the required parties sign the complete letter and follow your lender’s timing instructions.
Take the Guesswork Out of Gift Letters…..
In conclusion, a letter from the family should be a helping hand, not another paperwork headache. Therefore, a template comes as a resource and makes it easy for you to organize all the donor and borrower details and gift amounts in one place. Just fill it in, double-check it against your lender’s requirements, and you’re one step closer to turning the generous gesture into a property documented part of the home-buying process.
Frequently Asked Questions
Who writes and signs a gift letter?
The donor usually gives and signs the letter, while the borrower also needs to sign it, depending on the lender or loan program.
Does a gift letter need to be notarized?
Not always. Notarization generally depends on the lender’s requirements, so check the instructions first before submitting or notarizing it.
About This Article
