Gift Letter
A signed statement from a donor confirming that funds provided toward a home purchase are a gift, not a loan.
When down payment or closing-cost money comes from a parent, grandparent, or other allowed donor, the lender requires documentation that it isn't a hidden loan, otherwise the gift would inflate the borrower's debt load and skew underwriting.
A standard gift letter includes the donor's name and relationship, the dollar amount, the property address, and an explicit statement that no repayment is expected. Most lenders also want bank statements showing the donor had the funds available and showing the transfer into the borrower's account.
Some loan programs restrict who can be a gift donor, generally limited to family, fiancées, or established relationships. Gifts from sellers, agents, or interested parties to the transaction are usually prohibited or count as something else entirely (a seller credit, for example).
Related terms
Other terms you'll see alongside Gift Letter
The portion of a home's purchase price the buyer pays out of pocket up front, with the mortgage covering the rest.
The total amount of money the borrower must bring to the closing table in certified funds.
The lender's formal review of a loan application to confirm it meets program guidelines and is acceptable to fund.
Liquid funds the borrower must have available after closing, measured in months of full PITI payment.
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