What should a gifting letter to buy a home include?

What does a gifting letter to help us buy a home need to have?

When we need to make a down payment on a home we want to buy, we might need some additional help.  Someone close to us might notice and offer to help with the down payment in the form a gift.

However, they might not want to just simply give us the money...for any number of reasons.  So they might write up something called a gifting letter, which helps contribute toward a down payment of a home.  This gifting letter will be extremely helpful while applying for a home mortgage.

Key Question: What needs to be IN this Gifting Letter?

The many centuries old common law definition for a legal gift was simple. Three elements were necessary:

1. Intention to make a gift by the grantor (or donor);

2. Delivery of the gift;

3. Acceptance of the gift by the grantee (or donee).

The elements creating a valid gift to people applying for a mortgage are slightly more complex. First, it must be understood that the donor of the gift has no vested interest in the purchase of the property. This normally would include a seller, builder, or broker. Secondly, not everyone can make such a gift. In most situations lending institutions will approve gifts only from close relatives such as parents, siblings and grandparents. Also approved donors will be employers, labor unions, charities, and government agencies.

The basic elements of a gifting letter which will satisfy most lenders are as follows:

l. Date of the letter;

2. Name, address and telephone number of donor;

3. Relationship of donor;

4. Amount of the gift;

5. A short statement attesting to the fact that the gift has no requirement of repayment;

6. When the gift was given;

7. Source of the gift (e.g., bank funds via check, wire transfer, sale of stock, etc.);

8. Signature of donor(s) and donee(s).

Often banks ask for documentation pertaining to some of the above elements. For example, they might want to see a copy of the check itself and the deposit slip from the donee’s bank proving the exact amount and date of the deposit. All requests from the lending institution should be honored in an expeditious fashion.

It is of paramount importance to stress that all facts stated in the letter are truthful. For example, there cannot be an ancillary agreement to provide repayment to the donor, even many years in the future. Any false statement would constitute mortgage fraud where heavy fines and prison term are possible.