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.
mom gifted daughter $12,000. daughter uses money as part of down payment. mom signs letter stating gift. mom also provides proof of $80,000 CD from which money came. mortgage company also wants bank statement. this seems excessive. family lawyer, who is not specifically versed in real estate, advises against it. help!!!
Hi john!
Welcome to forums!
The bank will ask your mother to provide the bank statements. However, as your mother has provided the lender with proof of $80,000 CD from which money came, the lender shouldn't have asked for any more proof. You may ask the lender why he needs further proof.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
The bank will ask your mother to provide the bank statements. However, as your mother has provided the lender with proof of $80,000 CD from which money came, the lender shouldn't have asked for any more proof. You may ask the lender why he needs further proof.
Feel free to ask if you've further queries.
Sussane
i think sussane made a good point, in that the provision of the cd ought to be sufficient for what the lender needs. however, there must be more to it than that, so inquiring further is essential so you can understand just what they're driving at.
thx to sussane and george for your help - much appreciated - j
you are welcome.
what do they do to the gift letter and also do i need to report or pay any taxes on that money?
the gift letter becomes a permanent part of the loan file. for tax questions, you ought to consult with your tax advisor (if any) or check with the irs directly. taxation generally depends on the extent of a gift.
If I gift 90K to my fiance to purchase a house, how does this affect both of us both for taxes?
Hi mecca!
Welcome to forums!
You would be liable for paying gift taxes if you make a gift of 90k to your fiance in order to purchase a house.
Sussane
Welcome to forums!
You would be liable for paying gift taxes if you make a gift of 90k to your fiance in order to purchase a house.
Sussane
The amount of the loan is $100,000.00 . Family is buying from family. Can the gift letter for the down payment be given by a family member that owns equity in the home and is using the equity for the amount of the down paymen? Also, does it lower the amount of the loan or does the loan stay at $100,00.00? Please advise..
I am giving a gift to my daughter for a mortgage. It will be a cashier's check, and I will write a letter stating it is a gift and I don't want repayment. Why do I need to show a paper trail of MY money when it is a cashier's check? I am not the one appling for the loan. It is not their business where I got the money, only that it is a gift. I resent this. Is it necessary?
To L.Carter,
I think the person who owns equity in the property will be able to issue a gift of equity letter to the person purchasing the property. If you pay 20% down payment, then it will definitely lower your loan amount by that percentage.
To Guest,
It is necessary to give the proof of the fact as to where your daughter received the money from. As a result, you'll have to show a paper trail of your money.
I think the person who owns equity in the property will be able to issue a gift of equity letter to the person purchasing the property. If you pay 20% down payment, then it will definitely lower your loan amount by that percentage.
To Guest,
It is necessary to give the proof of the fact as to where your daughter received the money from. As a result, you'll have to show a paper trail of your money.
sorry, fed up, but it is a necessity. do you recall how there was so much fraud in the marketplace? that led to what you and many others consider ridiculous rules that force folk like you to divulge the source of their own funds that are being used for gifts. unfortunately, it's the way of the mortgage world now, and your daughter is going to be up the creek if you decide not to cooperate with her lender. they want to be sure that the donor of gift funds has the wherewithal to provide said gift. i understand your point, but the world of lending has changed, and not necessarily for the better.
Can the seller assist the buyer with a " gift" for the downpayment of the purchase?
Oscar, only a family member is allowed to "gift" funds to a buyer. If you're a father, brother, uncle, etc. then it is allowable. Otherwise, the best a seller can do is to provide a credit toward closing costs. Depending on the loan program chosen by a borrower, that credit could be up to 6% of the cost of the home.