A gift letter is a document that is used when a buyer is receiving a gift of money from a family member or friend to help with the purchase of a home. The letter is typically required by the lender as part of the mortgage application process to verify that the money is a gift and not a loan that needs to be repaid.
The gift letter typically includes the following information:
- The donor’s name, address, and phone number
- The donor’s relationship to the borrower
- The dollar amount of the gift
- A statement from the donor that the money is a gift and not a loan that needs to be repaid
- The donor’s signature
It’s important to note that gift letters are typically required when a buyer is making a down payment of less than 20% of the purchase price. Some lenders may also require that the gift be in the form of cash or a cashier’s check, and some may require that the donor provide bank statements to verify that they have the funds available to give as a gift.
It’s always important to check with the lender regarding their specific requirements for gift letters as well as any laws and regulations regarding gift letters in the state where the property is located. It’s also recommended to consult with a lawyer and real estate agent to ensure the legality of the transaction and any other requirements for the gifting.
In summary, a gift letter is a document that verifies that the money used for buying a house is a gift and not a loan. It’s typically required by the lender as part of the mortgage application process and usually required when the down payment is less than 20% of the purchase price. It’s important to check with the lender and consult with professionals regarding any specific requirements and regulations regarding gift letters.