What Does a Gift Letter Look Like for a Mortgage?

A gift letter for a mortgage serves as a formal declaration, confirming that funds provided to a homebuyer are a gift and not a loan. This document is crucial in real estate purchases, as it clarifies the nature of the funds for all involved parties, particularly lenders. Its primary purpose is to assure lenders that the money contributes to the borrower’s equity without adding to their debt obligations, which could impact their ability to repay the mortgage. Lenders require this letter to ensure transparency and compliance with lending regulations.

Key Information to Include

A mortgage gift letter requires specific details to be comprehensive and acceptable to lenders. The donor’s full name, address, and phone number must be clearly stated, along with the recipient’s full name and address. The exact amount of the gift should be specified both numerically and in writing.

The letter must contain an explicit statement confirming that the funds are a gift and that no repayment is expected or implied. It must state the purpose of the gift, such as “for the down payment on the property located at [Property Address].” The relationship between the donor and recipient, like “parent to child,” also needs to be established.

The date the letter is written is important. Lenders also typically require information about the source of the gift funds, including the donor’s bank name, account type, and account number. This helps verify the legitimacy of the funds and ensures they do not originate from any party with a financial interest in the property sale.

For 2025, the annual gift tax exclusion is $19,000 per recipient. Gifts below this amount generally do not require the donor to file a gift tax return with the IRS. However, a gift exceeding this amount will reduce the donor’s lifetime gift tax exemption, which is $13.99 million per individual for 2025.

Structuring and Formatting the Letter

The gift letter should follow a standard professional letter format. It begins with the date, followed by the donor’s contact information. The recipient’s contact information is usually included next. A formal salutation precedes the body paragraphs.

The body of the letter presents all the key information, ensuring a logical flow. This includes the declaration that the funds are a gift, the specific amount, the purpose, and the relationship between the parties. The language used should be clear and professional. The letter concludes with a closing, such as “Sincerely,” followed by the donor’s signature line and their printed name.

Finalizing and Submitting the Gift Letter

Once the gift letter is drafted with all the necessary details, the donor must physically sign the document. Many lenders do not require the gift letter itself to be notarized, provided all other information is complete and accurate. However, a lender might request notarization in certain situations.

The completed and signed letter should then be delivered to the recipient or directly to the mortgage lender. Lenders often require supporting financial documentation from the donor, such as bank statements showing the origin of the funds and proof of transfer into the recipient’s account. These documents verify the legitimacy and source of the gifted funds. Funds should ideally be “seasoned” by being in the recipient’s account for at least 60 days before the mortgage application to avoid additional scrutiny.