Securing money for a down payment for a home and paying a monthly mortgage
can be an overwhelming thought. Receiving a cash gift that you wouldn’t need to pay back would be a big relief. How do you obtain a gift like this?
When finalizing your mortgage rate, you’ll have to deal with underwriting. Underwriting is when your lender looks at your credit score, total assets, and your current income. They are looking to make sure the money in your accounts is truly yours, and not all loans. This is important for the lender to find out if you can actually afford your home loan, and if you will be able to pay it back in a timely manner. A lender can establish that the funds in your account are actually yours by having a gift letter.
Gift letters are uniquely written letters to your lender to let them know that the money is a gift, and not a loan. There are several things that your letter must include:
- The donor’s name, current address, and phone number
- Donor’s relationship to the client
- Exact dollar amount
- Date of the fund transfer
- Clear statement from the donor saying that no repayment is necessary
- Donor’s signature
- Address of the property to be purchased
These gifts can be given by anyone, however, for them to be accepted by the lenders, it must come from a family member, a domestic partner, or fiance.
While it seems like a lot of work to obtain a gift letter, it may be worth it. It could decrease your monthly payments and lessen the amount of savings you would need to close the deal. It could even mean the difference of getting a loan or not.