Gift letter
The signed statement a mortgage lender requires saying that money toward a purchase is a gift and will not be repaid.
What it means
When money from a family member goes toward a down payment on a mortgaged purchase, the lender needs to know whether it is a gift or a loan, because a loan changes what the borrower owes and the arithmetic the approval rested on.
The document that answers it is usually called a gift letter. It typically names the giver, the relationship, the amount, the property, and states that no repayment is expected. Lenders also ask for evidence of where the money came from and when it arrived.
The requirements are not uniform. Which relationships count as acceptable donors, how long the money must have been in the buyer's account, and what documentation is needed differ between loan programs and between lenders inside the same program.
Why it matters
The statement is made by the borrower, not by the family. Signing one while both sides privately expect repayment is a misrepresentation on a mortgage application, and the person carrying it is the buyer.
It is also the moment a family's vague understanding has to become a decision, which is usually the most useful thing about it.
When you are likely to meet it
- When a parent or relative is contributing to a down payment.
- When an underwriter asks where a recent deposit came from.
- When a family means the money as a loan and has not said so to anyone.