Free Gift Letter for Mortgage Template

A Gift Letter for a Mortgage is an affidavit that acknowledges money was given to a buyer by a relative (children, spouse, etc.) for a down payment or other property-related expenses.

The Gift Letter for a Mortgage verifies that the funds gifted are not a loan and that the donor does not expect repayment.

There is no set way to write a Mortgage Gift Letter. Standards and regulations may vary by jurisdiction. Below is an example of a typical Gift Letter for a Mortgage template.

Often, mortgage companies have their own requirements or specific language that they wish to have included. Depending on the company, underwriters can be particular about what they require.

You need a Mortgage Gift Letter anytime someone provides you with funds to help purchase a home. Lenders require this document to make sure the money is truly a gift, not a hidden loan that increases your overall debt.

You should use this document in the following scenarios:

• Earnest Money: When a family member or friend gives you money to put towards the final payment as a good-faith payment upon signing of the purchase agreement.
• Down payments: When a family member or friend gives you money to cover part or all of your required down payment.
• Closing costs: If the gifted funds are used to pay for appraisals, title searches, or other closing expenses.
• Financial reserves: To prove to lenders that you have adequate post-closing funds.

Gift Letter Regulations

Some of the common regulations you should be aware of, based on the type of property, include:

• Secondary residence or a 2-4 unit primary residence: You must contribute a minimum of 5% of your own funds if the loan-to-value (LTV) ratio exceeds 80%.
• Investment property: You cannot gift funds for the purpose of buying investment properties. All funds must come from the borrower.

Include these key elements to meet lender requirements and help yourself guarantee a smoother approval process:

• Donor information detailing who is providing the funds.
• Recipient Information identifying the homebuyer.
• Gift details stating the exact amount and confirming it is not a loan.
• Signatures from both parties to validate the document.

Writing a Gift Letter for a Mortgage involves several important steps to ensure it meets lender requirements and legal standards. Follow these steps to help you write your letter:

1. Include donor information: Begin by including the donor's full name, address, and contact details.
2. Add recipient information: Provide the recipient's full name and their relationship to the donor.
3. Explain the gift in detail: Specify the exact amount of the gift and the date of the transfer. Additionally, disclose the source of the funds, including the institution name and account details if necessary.
4. Include donor affirmations: The donor must affirm that the funds are a genuine gift with no expectation of repayment, no conditions attached, and no conflicts of interest, often signed under penalties of perjury.
5. Validate the gift letter: The Gift Letter must be signed by both the donor and recipient to be considered valid.
6. Attach Supporting Documents: Provide any necessary documentation, such as bank statements or transfer receipts, to substantiate the gift and its source.

Use our Gift Letter for a Mortgage template as a reliable foundation to help you during the writing process.

If you have any doubts or want to ensure your gift letter meets legal requirements, it is recommended to consult with a legal professional or financial advisor.

Both the donor and recipient must consider the possible tax implications of Gift Letters.

The annual exclusion for gifts is $19,000 per person. This means a donor can give up to $19,000 to a recipient without having to report the gift to the IRS.

If a gift exceeds $19,000, the donor must file IRS Form 709 (United States Gift (and Generation-Skipping Transfer) Tax Return). This form documents the gift and applies it against the donor's lifetime exemption.

The donor won't owe taxes if their total lifetime gifts are below the lifetime exemption, which is over 12 million dollars.

Generally, the recipient of a gift does not owe taxes on the amount received.

Both parties need to ensure all necessary documentation is completed to avoid any potential issues.

There are several other real estate documents that may interest you if you are drafting a Gift Letter for a Mortgage. These include:

• Real Estate Purchase Agreement
• Land Purchase Agreement
• Quitclaim Deed
• Warranty Deed Form