Mortgage down payment gift letter: what is it?
A down payment gift letter is a document confirming that the funds are a gift. It is not part of the loan that you must pay back. The paper must explain who donated the funds and the relationship between you and the donor.
Gift money can be spent on closing the mortgage. It can be anywhere from 2% to 6%, depending on the total amount. Some lenders allow you to use donated funds as a reserve fund. Therefore, using the correct sample gift letter mortgage is essential to distribute funds properly.
A sample of a gift mortgage letter
Lenders must provide a gift letter for mortgage template. Thanks to this, you can fill out the form correctly. Fill in all fields carefully. If you do not understand the text in small print, do not hesitate to ask questions. Below, we provide a typical gift letter sample for mortgage.
I/we now confirm the following:
I/we, Donor A and B, have made a gift of $15,000 to Borrowers C and D, and no return of this gift in the form of cash or future services of the recipient(s) is expected or intended.
The gift will be used to purchase real estate located at:
1234 Housing Lane, Anycity, Anystate, 12345
Source of funds for this gift:
Name of the bank: ABC Bank
Account type: (x) Checking ( ) Savings ( ) Other
account number: 54321
Relationship to the borrower: Parents
Donor names: A and B
Donor Address: 4321 Giftor Avenue
City: Anywhere / State: Anystate / Zip Code: 65432
Donor phone number: 987-654-3210
Donors A and B 09/01/22
*Date of the donor's signature
C. Homebuyer 09/21/22
*Signature of the borrower (recipient) Date
D. Homebuyer 09/21/22
*Signature of the borrower (recipient) Date
*Please note: Upon signature(s) of this donation letter. I/we certify that any funds provided to the purchaser(s) of the home have not been provided to the donor by any person interested in selling the property, including the seller, real estate agent, broker, builder, or loan officer or any other person involved in this transaction.
WE KNOW THE FOLLOWING:
I/we fully understand that knowingly making any false statement in applying for this mortgage is a federal crime punishable by fine, imprisonment, or both, under Title 18, United States Code, Section 1014 and section 1010.
Why do you need gift card information?
A creditor needs a downpayment gift letter for three reasons:
to certify that the person who donated funds is not one of the parties to the purchase of the real estate;
the gift down payment letter confirms that the funds are not part of the loan;
for tax purposes.
The mortgage gift letter template contains eight parts:
the exact amount of funds. The creditor must check the account statements of the donor and recipient to check whether the amounts match. Keep in mind that the amount of funds that do not need to be taxed is constantly changing;
a signature confirming that the funds do not need to return. It means that you do not borrow money but receive it as a gift;
the address of the mortgaged property. Binding to the housing that you will buy;
complete information about the person who donated the funds. The creditor must be sure that the donor is not interested in purchasing the property;
date of transfer of funds. Necessary to check the movement of funds between accounts;
relations between the parties. Sometimes, it is fundamentally essential for creditors that the monetary gift is from relatives or close friends;
complete information about the recipient of the funds. Without this information, gift funds cannot use to pay off a mortgage loan;
signature and date of both parties. Only after that will the letter become an official document.
Remember that if the money specified in the mortgage gift letter is not a gift, it is considered fraud. You will be accused of mortgage fraud.
How to correctly arrange gift funds for a mortgage
For the gift letter down payment, certain documents must be attached. Usually, it is:
bank account statement;
statement from the account to which the funds were credited.
Sometimes, the list of documents may change. It is worth asking the creditor what exactly require for confirmation.
What amount can you receive as a gift for mortgage registration?
Most lenders allow you to pay all or part of the down payment. At the same time, sources of financing can be different: relatives, friends, and acquaintances. It can even be funding from a government institution or a charitable company.
Gift funds can be used not only as a down payment but also to close a mortgage. In this case, you should familiarize yourself with the creditor's requirements to prepare all the documents correctly.