What Is a Gift Letter? How to Write a Mortgage Gift Letter

What Is a Gift Letter?

If you are getting ready to buy a home, your friends and family might want to contribute to your down payment or closing costs. This is such a generous gesture, and one to be grateful for, but you need to make sure that you make it clear to your lender that your gift is not a loan that needs to be repaid.

If a friend or family member loans you money, this will affect your debt to income ratio, which can in turn affect your ability to get approved for a mortgage. But how does your lender know what the difference is between a loan and a gift when it’s from a family member or a friend? For this, you will use a gift letter.

In a gift letter, your donor will certify that the money they are gifting you is not expected to be repaid in any way - whether through actual finds, or through services. When your donor writes the gift letter, your lender will keep it on file as assurance that you do not owe anyone any additional money outside of your current debts.

How to Write a Mortgage Gift Letter

There are several things that your donor must include in your gift letter, which are listed below!

• The relationship between the donor and buyer

• The donor’s bank name, account number, and account type

• Your donor’s name 

• The date that the gift money will be transferred

• The property address 

• Your donor's contact information

• The gift amount in dollars

• The donor’s signature

• Verbiage that states that the money does not need to be repaid

Receiving gifts from your friends and family is so kind. Before you accept any funds, make sure they write a gift letter for your lender.