When you are in the process of buying a home it is important to choose the mortgage and lending option that works best for you. One such option is using gift funds to pay a portion of the down payment or closing costs. This gives you the opportunity to secure better and more manageable mortgage terms. However, it is important to understand the process relating to the use of these funds so that you have all the information you need before applying for a mortgage.
What Is a Gift Letter?
In order to use a gift toward the purchase of a new home there are certain requirements you must fulfill. One such requirement is obtaining a mortgage gift letter from the person who will be providing the funds. A gift letter for mortgage applications basically states that the person giving you the money is doing so as a gift and not a loan. This means that there is no expectation or implication of repayment for the money so the mortgage lender is confident the donor will not make future claims in order to collect.
What Should a Gift Letter Include?
Writing a mortgage gift letter is simple. There are a few elements that you must include to 
satisfy the requirements when using these funds, which can easily be completed prior to applying for a mortgage. In addition to the names and signatures of the donor and recipient, it is necessary to include the amount of the gift, the donor’s relationship to the recipient, and the address for which the gift will be applied to. You must also certify that there is no expected repayment of the gift and that the funds being used were not provided by a third party with interest in the sale of the property being purchased.
The final pieces of information you will need for your gift letter are confirmations that the money has been withdrawn from the donor’s account and received by the purchaser. This can be done with bank statements or other certified documents for proof. If you need assistance writing the letter, use our mortgage gift letter template to get started. To get started, here are some steps to complete for the gift letter:
- Print and Sign the provided gift letter – Example Letter
- Have the donor sign it (immediate family, fiancé only)
- We will then need a copy of the front and back of the cleared check
- Proof it came out of the donors account such as a bank statement
- Proof it was deposited into your account via a transaction history
- If the gift money is in the form of a cashier’s check we will need proof that the money came out of the donor’s bank account. Please provide the donors bank statement.
- We don’t allow cash to be used and then put into a cashiers check, before depositing, we need a copy of the check, proof it cleared from both parties and then proof it went into your account.
- If you could have the gift handled in the next few weeks that would be ideal.
- Seeing the money in your bank account before we turn the file into underwriting makes for a much smoother underwrite.
A and N Mortgage in Chicago can help you with the loan process and with the gift letter. Contact us today to speak to one of our lenders at (773) 305-LOAN.
