Table of Contents
The Gift Letter form plays a crucial role in the process of transferring funds from one individual to another, particularly in real estate transactions. This document serves as a written declaration that a gift is being provided, often to assist with a down payment on a home. It outlines the relationship between the donor and the recipient, ensuring that the funds are indeed a gift and not a loan. By clarifying this distinction, the form helps lenders assess the financial situation of the borrower more accurately. Additionally, it typically includes the amount of the gift and the donor's acknowledgment that they do not expect repayment. Completing the Gift Letter form correctly can streamline the mortgage approval process and alleviate potential concerns from financial institutions regarding the source of funds. Understanding its importance is essential for both givers and receivers, as it not only facilitates the transaction but also ensures compliance with lending requirements.
Documents used along the form
When applying for a mortgage, a Gift Letter form is often required to document financial gifts used for the down payment. Along with this form, there are several other documents that may be necessary to provide a complete picture of the financial situation. Here are four commonly used forms and documents:
- Bank Statements: These documents show the donor's account balance and transaction history. They help verify the source of the gift funds and confirm that the money is available for use.
- Gift Tax Return (IRS Form 709): If the gift exceeds the annual exclusion limit, the donor may need to file this form. It reports the gift to the IRS and ensures compliance with tax regulations.
- Verification of Employment (VOE): This document confirms the borrower's employment status and income. Lenders use it to assess the borrower's ability to repay the mortgage.
- Homeschool Letter of Intent: This essential document notifies the state of a parent’s decision to homeschool their child and can be accessed at califroniatemplates.com.
- Loan Estimate (LE): This form provides a detailed breakdown of the loan terms, including interest rates and closing costs. Borrowers receive this document shortly after applying for a mortgage.
Having these documents ready can streamline the mortgage application process and help avoid delays. Always ensure that all forms are completed accurately and submitted on time to facilitate a smooth transaction.
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Gift Letter Example
GIFT LETTER
Applicant(s): |
Loan Number: |
I, |
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, do hereby certify the following: |
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(Donor) |
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(1) I have made a gift of $ |
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to |
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(Amount) |
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(Recipient) |
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Whose relationship is: |
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(Relationship) |
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(2) This gift is to be applied toward the purchase of the property located at:
(Property Address)
(3)No repayment of the gift is expected or implied in the form of cash or by future services of the recipient.
(4)The funds given to the homebuyer were not made available to the donor from any person or entity with an interest in the sale of the property including the seller, real estate agent or broker, builder, loan officer, or any entity associated with them.
(5)The source of this gift is:
(Source)
Donor Signature |
Date |
Borrower Signature |
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Donor Name (Print or Type) |
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Borrower Signature |
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Donor Address |
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Donor Phone Number
WARNING: Our signatures above indicate that we fully understand that it is a Federal Crime punishable by fine, imprisonment, or both to knowingly make any false statement concerning any of the above facts as applicable under the provision of Title 18, United States Code, Section 1012 and 1014.
Attachments:
1.Evidence of Donor's Ability to Provide Funds.
2.Evidence of Receipt of Transfer of Funds.
Calyx Form - giftlttr.frm (05/02)
FAQ
What is a Gift Letter form?
A Gift Letter form is a document that verifies a monetary gift given to a borrower, typically for a home purchase. This form outlines the relationship between the donor and the recipient, confirming that the funds do not need to be repaid. Lenders often require this letter to ensure that the borrower has sufficient funds for a down payment without incurring debt.
Who needs to use a Gift Letter form?
Anyone receiving a monetary gift to help with a home purchase may need to use a Gift Letter form. This includes first-time homebuyers or those who may not have enough savings for a down payment. Typically, family members or close friends provide these gifts, and lenders want to ensure the funds are a true gift and not a loan.
What information is included in a Gift Letter?
A Gift Letter generally includes the following information:
- The donor's name and contact information
- The recipient's name
- The amount of the gift
- A statement confirming that the funds are a gift and do not need to be repaid
- The relationship between the donor and recipient
- The date the gift was given
Providing this information helps lenders verify the legitimacy of the gift.
Do I need to have the Gift Letter notarized?
Notarization of the Gift Letter is not typically required, but it can add an extra layer of authenticity. Some lenders may request a notarized letter to ensure that the donor's signature is legitimate. It's always best to check with your lender for their specific requirements.
Can I use a Gift Letter for a down payment on any type of loan?
Gift Letters are commonly accepted for various types of loans, including conventional, FHA, and VA loans. However, each lender may have different policies regarding the use of gift funds. Always confirm with your lender about their specific guidelines and whether they accept Gift Letters for the type of loan you are pursuing.
What happens if I don’t provide a Gift Letter?
If you fail to provide a Gift Letter when required, it may lead to complications in the loan approval process. Lenders may question the source of your down payment funds, which could delay your mortgage application or even result in denial. To avoid any issues, it’s best to provide the Gift Letter as part of your documentation when applying for a loan.
Key takeaways
- Understand the purpose: A Gift Letter is used to document financial gifts, especially in real estate transactions, to clarify that the funds do not need to be repaid.
- Identify the donor: The person giving the gift must clearly state their name, address, and relationship to the recipient.
- Specify the amount: Clearly indicate the exact dollar amount being gifted to avoid confusion.
- Include the date: The letter should specify when the gift was given to establish a clear timeline.
- State the purpose: Mention that the gift is intended for a specific purpose, such as a down payment on a home.
- Avoid repayment language: The letter must clearly state that the funds are a gift and do not need to be repaid.
- Signature required: The donor must sign the letter to validate the gift and confirm their intent.
- Keep it simple: Use straightforward language to ensure clarity and avoid misunderstandings.
- Provide additional documentation: It may be helpful to include bank statements or other proof of funds alongside the letter.
- Consult with a professional: Before using the Gift Letter, consider seeking advice from a financial advisor or real estate professional.
Form Characteristics
| Fact Name | Description |
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| Definition | A Gift Letter is a document used to confirm that a financial gift is being provided, typically to assist with a home purchase. |
| Purpose | It helps lenders verify that the funds are indeed a gift and not a loan, which could affect the borrower's debt-to-income ratio. |
| Common Use | Gift Letters are often used in real estate transactions, especially for first-time homebuyers who may receive funds from family members. |
| Required Information | The letter should include the donor's name, the recipient's name, the amount of the gift, and a statement that the funds do not need to be repaid. |
| State-Specific Forms | Some states may have specific requirements for Gift Letters; for example, California requires adherence to the California Civil Code regarding gifts. |
| Tax Implications | Donors should be aware of potential gift tax implications; gifts over a certain amount may need to be reported to the IRS. |
| Signature Requirement | Typically, both the donor and recipient should sign the letter to validate the gift and clarify intentions. |