I'm using gift money? Why does the lender want a gift letter?

Why do I need a gift letter?

You want to use gift money for your down payment or closing costs, and the lender is asking for a gift letter from whoever is giving you the money. Lenders require gift letters to document that the money is actually a gift—not a loan you'll need to repay—and to verify the relationship between you and the gift giver.

A gift letter typically includes the gift amount, the relationship between you and the person giving the gift, and a statement that the money doesn't need to be repaid. The letter shows lenders that this money won't create additional monthly debt obligations that could affect your ability to make mortgage payments. Most lenders also want to see the gift giver's bank statements showing they have the funds available.

Check your Loan Estimate to see what documentation your lender needs. Some lenders want the gift letter signed before you receive the money, while others accept it afterward. The gift giver usually needs to provide bank statements and sometimes proof that the funds were transferred to your account.

Share the gift details with your lender early in the process and they can walk you through their specific requirements for the letter format and timing.