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Everything You Need to Know About Gift Letters

What is a Gift Letter?

A gift letter is a document provided by a donor that states that the gift is not a loan, and that the donor does not expect to be repaid for the gift. The letter is usually required by a lender when a potential buyer is using gifted money from a family member or another third party to fund a down payment or closing costs of a home purchase.

Who Can Provide a Gift Letter?

The gift letter can be provided by a family member, such as a parent, grandparent, sibling, or other relative. It can also be provided by a close friend, or even a charitable organization. In some cases, an employer may provide a gift letter.

What Does a Gift Letter Say?

A typical gift letter will include the donor’s name, address, and phone number, as well as the amount of the gift. It will also include a statement that the money is a gift and not a loan, and that the donor does not expect to be repaid. In some cases, it will also include the relationship between the donor and the borrower.

Do I Need a Gift Letter?

The gift letter is typically required by lenders when you are using gifted funds for a home purchase. In some cases, the funds may be a gift from a family member or a close friend. In other cases, the funds may be from a charitable organization, such as a church or nonprofit organization.

What Else Do I Need for a Gift Letter?

In addition to the gift letter, lenders may also require that the donor provide a bank statement or other documentation to verify that the money was transferred to the borrower. This is to ensure that the money is actually a gift and not a loan.

Sample Gift Letters

Gift Letter From a Family Member

• This letter is to certify that I, [name], am gifting [amount] to [recipient’s name] for the purchase of a home. This money is a gift and not a loan, and I do not expect to be repaid.

• I certify that the funds are coming from my own personal funds and that I have the legal right to make this gift. I am [relation to recipient], and I have known [recipient] for [length of time].

• Sincerely,

• [name]

Gift Letter From a Charitable Organization

• This letter is to certify that [organization name] is gifting [amount] to [recipient’s name] for the purchase of a home. This money is a gift and not a loan, and we do not expect to be repaid.

• We certify that the funds are coming from our own organization funds and that we have the legal right to make this gift. We have known [recipient] for [length of time].

• Sincerely,

• [organization name]

Gift Letter From a Close Friend

• This letter is to certify that I, [name], am gifting [amount] to [recipient’s name] for the purchase of a home. This money is a gift and not a loan, and I do not expect to be repaid.

• I certify that the funds are coming from my own personal funds and that I have the legal right to make this gift. I have known [recipient] for [length of time].

• Sincerely,

• [name]

Conclusion

A gift letter is a document that must be provided by a donor when a potential buyer is using gifted money to fund a down payment or closing costs of a home purchase. The letter must include a statement that the money is a gift and not a loan, and that the donor does not expect to be repaid. In addition to the gift letter, lenders may also require that the donor provide a bank statement or other documentation to verify that the money was transferred to the borrower.