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 Jackie,
I hope the donor of the gift had deposited the 4k in his bank account first and then had a check issued from the bank authority. Thus, there must be a document stating the deposition of the amount. Thus, while he withdraws the money in the form of a check, it will be considered as a proof.
I hope the donor of the gift had deposited the 4k in his bank account first and then had a check issued from the bank authority. Thus, there must be a document stating the deposition of the amount. Thus, while he withdraws the money in the form of a check, it will be considered as a proof.
I got engaged, wrote a $5K personal check to Remax and $25K personal check to fiance with a gift letter for the down payment on the house. He told me that he was told by his atty that my name would go on the deed of the house after we were married (which is false - could have gone on before marriage) My name was not on deed or loan. Closed on the house and broke the engagement soon after, I moved out and he then sold the house and denies we were ever engaged. The engagement ring turned out to be a CZ and worthless. I am convinced this was a planned and fraudulant act on his part which netted him $30K of my money. Do I have any recourse
I got engaged, wrote a $5K personal check to Remax and $25K personal check to fiance with a gift letter for the down payment on the house. He told me that he was told by his atty that my name would go on the deed of the house after we were married (which is false - could have gone on before marriage) My name was not on deed or loan. Closed on the house and broke the engagement soon after, I moved out and he then sold the house and denies we were ever engaged. The engagement ring turned out to be a CZ and worthless. I am convinced this was a planned and fraudulant act on his part which netted him $30K of my money. Do I have any recourse
if you think it's fraud, you need a good lawyer to tell you his/her opinion. and, if his lawyer was in cahoots with him in a fraud, you'll want to make sure your lawyer isn't that one's buddy.
you erred in moving out and not staking a claim on your $30K, but if you have a case, then i guess you'll be made whole or close to it eventually.
since you think his lawyer was, at best, incorrect, you may want to ring up your state's attorney general's office.
you erred in moving out and not staking a claim on your $30K, but if you have a case, then i guess you'll be made whole or close to it eventually.
since you think his lawyer was, at best, incorrect, you may want to ring up your state's attorney general's office.
already started the process..mediation coming up but I dont anticipate he will agree to pay. I made several errors: Should have gotten a promisary note - but we were to be getting married. I had assumed that he lied to me about asking his atty, but maybe not...I think my atty should probably depose the closing atty. My fiance did NOT want me at the closing...wasn't a red flag at the time, but looking back I wish I was there. I have a good case, but the gift letter may really screw me. People (ususally family members) loan money and write gift letters because it's req by the lender...I thik this is general knowledge, but don't know how that will play out in court
already started the process..mediation coming up but I dont anticipate he will agree to pay. I made several errors: Should have gotten a promisary note - but we were to be getting married. I had assumed that he lied to me about asking his atty about when I can be added to the deed, but maybe not...I think my atty should probably depose the closing atty. My fiance did NOT want me at the closing...wasn't a red flag at the time, but looking back I wish I was there. I have a good case, but the gift letter may really screw me. People (ususally family members) loan money and write gift letters because it's req by the lender...I thik this is general knowledge, but don't know how that will play out in court
it's hard to say if most family gifts are actually loans or not. i advise potential borrowers that they may use gift funds for downpayment, and that we have to verify the terms, etc. of said gift if they get one. i have seen unsophisticated donors write a note saying that they will get paid back at some point, and i remind them that a loan is not a gift.
but lenders have their own gift letter format, and that's what most people are going to end up signing.
but lenders have their own gift letter format, and that's what most people are going to end up signing.
and i hope, for your sake, kristen, that your lawyer is good.
We are buying a house and getting a gift from my in-laws. They do not want to show their bank statements. And I understand, is it not a violation of the donors privacy to ask them to provide a bank statement because they gave us money? We are trying everything to verify these funds without a statement, but it is impossible. Any suggestions
when guidelines are established, they're ironclad. you said it was impossible, i didn't, and yet you think you have a way out somewhere. i recognize that people feel it's an invasion of privacy to have to prove that they have the money to give to you, but you have to recognize that there's been so much fraud over the years, so many dishonest folk working in and around the industry, that lenders have pulled out all the stops to verify everything that's verifiable.
if your folks don't want to provide the statement, that's fine; but you won't accomplish your goal of obtaining the gift from them, because your loan won't happen without it.
try and persuade them to understand the pressures that the lenders feel - to do business with upstanding citizens and the need for verification of every little detail.
if your folks don't want to provide the statement, that's fine; but you won't accomplish your goal of obtaining the gift from them, because your loan won't happen without it.
try and persuade them to understand the pressures that the lenders feel - to do business with upstanding citizens and the need for verification of every little detail.
I'M A REAL ESTATE BROKER AND I'VE WRITTEN AN OFFER ON A HOUSE FOR MY DAUGHTER. I WANT TO GIVE HER ALL OF MY COMMISSION IN THE FORM OF A GIFT LETTER. HOW DO I DO THAT?
wouldn't you think that NAR would have a Q&A for that kind of scenario? i think that's pretty deep, and, never having seen it happen before, i have a feeling lenders might be nervous about it. perhaps if NAR isn't up on the topic, you may want to check in with an attorney for some further clarification.
and i have to say i don't know what a lawyer would bring to the table.
and i have to say i don't know what a lawyer would bring to the table.
Hi George I have quick question, my mother in law is a little worried on doing the gift letter process, she lives Mexico and has a usa visa, she doesn't want to do gift letter because she is afraid that immigration will think she's is sending the money to me so she can stay and live in America, which isn't the case, I highly doubt it. What should I tell her? So she can accept doing the gift letter?
Thanks for the great article on this subject. This is well covered and important for people to know and understand.
john 57, i don't have anything specific that i can recommend you say to your mother in law, but let me just lay out some things that may help her feel better about it.
first and perhaps most important for her, immigration authorities are not going to learn about the gift. the reason lenders look for verification that the donor of a gift has the funds intact already is to allow certainty that there's nothing odd about the transaction. as for what is "odd" i think i would include funds that she might have borrowed to give to you; a suddenly larger than usual deposit that goes into her account that resulted in her gift to you; a deposit equal to the gift being given that corresponds with funds withdrawn from one of your accounts...things like that.
lenders need to be secure that you have no need to pay the gift back, and that the donor is financially secure enough to be able to grant such a gift.
the documentation gathered stays in the loan package. the loan package doesn't go to the irs, immigration, the white house, congress, rush limbaugh or any of those entities that might strike fear into her heart.
i don't know of any act or statute that i could cite which would ease her discomfort, but if any or all of the above can be of assistance, i'm pleased.
first and perhaps most important for her, immigration authorities are not going to learn about the gift. the reason lenders look for verification that the donor of a gift has the funds intact already is to allow certainty that there's nothing odd about the transaction. as for what is "odd" i think i would include funds that she might have borrowed to give to you; a suddenly larger than usual deposit that goes into her account that resulted in her gift to you; a deposit equal to the gift being given that corresponds with funds withdrawn from one of your accounts...things like that.
lenders need to be secure that you have no need to pay the gift back, and that the donor is financially secure enough to be able to grant such a gift.
the documentation gathered stays in the loan package. the loan package doesn't go to the irs, immigration, the white house, congress, rush limbaugh or any of those entities that might strike fear into her heart.
i don't know of any act or statute that i could cite which would ease her discomfort, but if any or all of the above can be of assistance, i'm pleased.