How to Get a Gift Letter for Mortgage

A gift letter for a mortgage is a formal document confirming that funds provided to a homebuyer for their home purchase are a genuine gift and not a loan. This letter assures mortgage lenders the money does not need to be repaid, which is important for assessing a borrower’s financial stability. Lenders require this documentation to ensure significant funds are legitimate and do not represent undisclosed debt. Without a gift letter, a large deposit could be mistaken for an unrecorded loan, potentially impacting the borrower’s debt-to-income ratio and their ability to qualify for the mortgage.

Essential Information for Your Gift Letter

The gift letter must contain specific information to satisfy lender requirements. It should state the exact dollar amount of the gift provided to the homebuyer. The letter must also indicate that these funds are a gift and no repayment is expected or implied from the recipient. Any expectation of repayment could classify the funds as a loan, affecting the borrower’s eligibility.

The letter needs to identify the donor, including their name, address, and telephone number. The donor’s relationship to the borrower must also be stated; eligible donors are typically relatives by blood, marriage, adoption, or legal guardianship. Some loan programs may permit gifts from close friends with a familial relationship, employers, labor unions, or certain charitable and governmental organizations. However, individuals with a financial interest in the property, such as the seller, builder, or real estate agent, are generally not permitted to provide gift funds.

The purpose of the gift funds must be specified, such as for a down payment, closing costs, or mortgage reserves. The letter should include the date the funds were or will be transferred to the recipient. If known, the property address being purchased should also be included. The donor’s signature and the date of signing are mandatory to validate the letter. Some lenders may also require the borrower’s signature.

While annual gift tax exclusion limits exist ($19,000 per recipient for 2025), this generally impacts the donor, not the mortgage recipient. If a gift exceeds this exclusion, the donor may need to file a gift tax return (IRS Form 709). Actual gift tax is typically only owed if the donor exceeds their lifetime gift tax exemption ($13.99 million per individual for 2025). Gifted funds are not considered taxable income for the recipient.

Documenting the Gift Fund Transfer

Proving the actual transfer of funds from the donor to the recipient is the next step. Lenders require a clear paper trail to verify the source and movement of the gifted money. This involves providing bank statements from both the donor and the recipient. The donor’s statement should show the withdrawal, and the recipient’s statement must show the corresponding deposit.

Funds should ideally be “seasoned” in the recipient’s account, meaning they have been present for at least 60 days, reducing the need for extensive sourcing. If funds are transferred closer to the mortgage application, detailed documentation becomes even more important. Acceptable transfer proof includes copies of certified checks, wire transfer receipts, or electronic statements clearly showing the transaction. The amount shown in these documents must match the amount stated in the gift letter.

Direct cash gifts are generally not permitted because they lack a verifiable paper trail, complicating the lender’s ability to trace the funds’ origin. If gift funds are wired directly from the donor’s account to the closing agent at closing, some detailed bank statement requirements for the recipient might be reduced. However, the donor’s bank statements may still be required to confirm fund availability. This documentation ensures funds are not from an unapproved source or an undisclosed loan.

Submitting Your Gift Documentation

Submit the completed gift letter and all supporting documentation to your mortgage lender. This is typically done as part of your initial mortgage application package or during the underwriting phase. The lender’s underwriting team will review the submitted materials to ensure compliance with lending guidelines.

Lenders often perform additional verification steps, which may include contacting the donor directly to confirm the gift and its terms. They may ask the donor to provide further documentation, such as bank statements, to verify the source of their funds and confirm they had the money available prior to the gift. Borrowers should prepare for these inquiries and ensure their donors are aware they might be contacted.

Any large deposits appearing on the borrower’s bank statements that are not regular income will require explanation and documentation. If gifted funds are deposited into the borrower’s account well before the application, the lender will still need a clear transaction history.