Signed mortgage document identifying a proposed gift and confirming that the funds do not have to be repaid.
A gift letter is a signed mortgage document that identifies a proposed gift and states that the borrower does not have to repay the money or equity provided.
The letter documents the gift terms. It does not replace evidence that the donor is eligible, has the funds, and completed the transfer.
Underwriting must distinguish a genuine gift from undisclosed debt. If the borrower has a side agreement to repay the donor, the lender may need to evaluate that obligation and may not accept the funds as a gift.
The letter also ties the donor, borrower, amount, and transaction together. Vague statements such as family help or personal money do not provide the same file-specific evidence.
A correct letter can still be incomplete if the transfer amount, donor name, or timing does not match the account and closing records. The gift documentation must tell one consistent story.
The lender usually requests a gift letter during preapproval or underwriting after the borrower identifies Gift Funds or a Gift of Equity as part of the transaction.
The borrower should use the lender’s requested form or requirements before money moves. Program rules can differ, and a generic online template may omit a required statement or signature.
At or before closing, the lender matches the letter with donor evidence, transfer records, the borrower’s account or settlement-agent receipt, and the final transaction figures.
| Letter item | Why it matters |
|---|---|
| Donor name and contact information | Identifies the person or entity providing the gift |
| Donor relationship or status | Supports Gift Donor eligibility review |
| Borrower and property or transaction | Connects the letter to the correct mortgage file |
| Actual or maximum gift amount | Sets the amount the documentation must support |
| No-repayment statement | Distinguishes the gift from a private loan |
| Signatures and date | Shows acknowledgment by the required parties |
The exact fields and signers depend on the program and lender. A gift-of-equity letter may also describe the seller relationship and the equity amount reflected in the purchase structure.
| Separate question | Common supporting evidence |
|---|---|
| Did the donor have the money? | Donor account or source evidence when required |
| Did the money move? | Check, wire, electronic-transfer, withdrawal, deposit, or settlement records |
| Did the borrower or closing agent receive it? | Borrower account evidence or closing documentation |
| Is the donor permitted? | Relationship and program-eligibility review |
| Does the amount match the transaction? | Updated asset totals and final closing figures |
The letter is therefore one part of Asset Documentation, not a substitute for the entire transfer trail.
Jordan’s gift letter states that an eligible donor will provide $15,000, but the borrower’s account receives $18,000 from a different name. Underwriting pauses the gift review because the letter and transfer do not match.
The parties correct the documentation and explain the account ownership before closing. The issue was not that gifts are prohibited; it was that the file did not yet establish a consistent source and transfer.
Gift letter differs from Gift Funds because the letter documents the arrangement, while the funds are the money being transferred.
It differs from Gift Donor because donor describes the provider and eligibility question. The letter records that person’s proposed gift.
It differs from Source of Funds because source review establishes where the money originated. The letter states the gift terms but does not necessarily prove the donor’s source.
It differs from a Letter of Explanation because a gift letter contains required gift-specific representations. A general explanation supplies context but does not replace the required gift document.