Posted on: 08th Apr, 2004 11:37 pm
Mortgage Gift letter is what the donor of the gift writes to the lender stating that he has offered a gift of money to the home buyer.
Homebuyers often require extra funds to make their down payment or pay part/whole of their closing costs when there is shortage of cash to pay for these upfront costs. They can borrow from a non-profit organization but lenders often do not prefer borrowed money as the down payment. In this situation, cash gift from family members is very helpful.
When a gift is made available to a homebuyer applying for a mortgage, he needs to write a mortgage gift letter signed by the donor and attach it with the loan application form. At times, the lender may also provide the buyer with a Gift Letter form which the latter only needs to fill out.
However, if the gift is made by any non-family member such as friend, employer, etc, then a borrower needs to provide documentation of a very close and long lasting relationship.
Homebuyers often require extra funds to make their down payment or pay part/whole of their closing costs when there is shortage of cash to pay for these upfront costs. They can borrow from a non-profit organization but lenders often do not prefer borrowed money as the down payment. In this situation, cash gift from family members is very helpful.
When a gift is made available to a homebuyer applying for a mortgage, he needs to write a mortgage gift letter signed by the donor and attach it with the loan application form. At times, the lender may also provide the buyer with a Gift Letter form which the latter only needs to fill out.
However, if the gift is made by any non-family member such as friend, employer, etc, then a borrower needs to provide documentation of a very close and long lasting relationship.
How to write Mortgage Gift letter
A mortgage gift letter includes the following:
Apart from the above, the gift letter should also state that the buyer need not repay the gift amount. Also, the lender should be assured that the gift funds were not made available to the donor from any person involved with the sale of the property including the seller, broker, real estate agent, loan officer or builder etc.
With gift of money, a buyer can afford to purchase a bigger house. At the same time, he can borrow less and thus reduce his monthly payments. However, the homebuyer needs to provide a written statement and prove that the money he's putting down is a gift. Here's where a mortgage gift letter serves its purpose.
- Name of donor of the gift
- Name of the recipient
- Relationship between the donor and recipient
- Cash amount gifted
- Address of the property for which gift is made
- Source of the funds (bank account, brokerage account etc) as offered by the donor.
Apart from the above, the gift letter should also state that the buyer need not repay the gift amount. Also, the lender should be assured that the gift funds were not made available to the donor from any person involved with the sale of the property including the seller, broker, real estate agent, loan officer or builder etc.
With gift of money, a buyer can afford to purchase a bigger house. At the same time, he can borrow less and thus reduce his monthly payments. However, the homebuyer needs to provide a written statement and prove that the money he's putting down is a gift. Here's where a mortgage gift letter serves its purpose.
Hi Soulis,
A query similar to yours has been answered in the given page: http://www.mortgagefit.com/Mortgage-Basics/Gift-letter-but-NOT-a-gift.html .
Please take a look at it. I hope it will help you.
A query similar to yours has been answered in the given page: http://www.mortgagefit.com/Mortgage-Basics/Gift-letter-but-NOT-a-gift.html .
Please take a look at it. I hope it will help you.
Hello, my Son lives with his girlfriend, in a flat owned by her Mother. They want to buy the flat but do not have sufficient money to put down as the required deposit. Mother is prepared to cut the price of the property by £60,000 as a gift. She has no ready cash. Would the Mortgage people accept this as a deposit?
Welcome Gill snow,
It will be completely the lender's discretion whether or not they will consider this as a deal. Your son should contact the local lenders and check out their opinion in this regard.
It will be completely the lender's discretion whether or not they will consider this as a deal. Your son should contact the local lenders and check out their opinion in this regard.
Hi krdont!
Welcome to the forums!
As it is a joint account, I guess both the spouses need to sign the letter.
Sussane
Welcome to the forums!
As it is a joint account, I guess both the spouses need to sign the letter.
Sussane
My sister needs a mortgage gift letter in the amount of 6000 however insists that I do not actually have to give the money to her the letter alone will suffice without the funds being transferee. Is this possible?
Hi svm!
Welcome to the forums!
It won't be a very legal thing to do. So, before you give her such a letter, think of the pros and cons of the deal.
Feel free to ask if you've further queries.
Sussane
Welcome to the forums!
It won't be a very legal thing to do. So, before you give her such a letter, think of the pros and cons of the deal.
Feel free to ask if you've further queries.
Sussane
Does the recipient of a $20,000 gift money needed towards a down payment on a home need to pay taxes on the funds? If so, Fed? and/or State? He's my son and I need to know before going thru with this transfer.
Welcome Ms. Frankie,
The person who gifts the money may be liable for paying gift taxes. The person who receives the gift won't have to pay any taxes.
The person who gifts the money may be liable for paying gift taxes. The person who receives the gift won't have to pay any taxes.
I have saved tip cash earned income but it is not deposit in my bank account. Can I use that for down payment and I do have my paycheck that is showing cash advance(tips). Will the bank except that?
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