Using Gift Letters for Your Mortgage – A 2022 Homebuyer’s Guide

Using Gift Letters for Your Mortgage – A 2022 Homebuyer's Guide

It seems to be almost impossible to get a home without a mortgage in today’s steady life. 

Maybe that is the reason that now we are witnessing several mortgage companies flourishing all over the country. Like everywhere, we also have different mortgage companies in Dallas. With slight variations, every company offers different criteria to its users.

One of the great things that many people prefer to opt for while receiving a mortgage from a lender is the Mortgage gift. The applicant needs to submit a mortgage gift letter to the lender as only then they can use their received funds to make a downpayment. 

Once the application gets approved, the applicant is issued the mortgage and can proceed further.

So, today we are going to get into the discussion of this mortgage gift letter. Many of you might be well aware of it. Some might get confused about what it is? Let’s talk in detail about it, the conditions, its durability, etc.

Mortgage Gift Letter

A mortgage gift letter is proof by a person that they are gifting you some or all of the down payment, and you do not have to pay it back, ever. The document is signed by the person giving you the money. That means parents cannot tap the equity in their home, give you the money as a loan, and expect you to pay them back in the future.

The letter goes to your mortgage lender. It is a part of your mortgage pre-approval. Furthermore, they might verify whether the money has been deposited in your bank account. However, they do not need to check or access the bank accounts of the gifter.

Minimum Cash Limit for a Mortgage Gift

It is limitless. You do not need to bother about the minimum or maximum amount. You can get as much as you want as a gift. But, there are a few things that you need to consider.

Suppose you have got the full 40% down payment. If you are self-employed, you have to come up with 10% of the down payment on your own. The amount cannot be gifted to you as a mortgage gift.

However, you can receive the remaining 10% payment as a gift. Keeping this restriction in mind, you can easily handle mortgage payments. You can use the gift for the entire 40% down payment amount if employed full-time.

From whom can you get a Mortgage Gift?

There is no limit for the amount of a mortgages gift. The matter of concern is that you can receive a mortgages gift from whom.

When you consult with different lenders and mortgage programs, you will witness different rules. Some restrict gifts only from a blood relative or even a godparent. Other companies allow gifts from friends and non-profit organizations.

Some recent cases include conventional loans. For these, the only eligible donors are the family members. It can include family by blood, marriage, or adoption. It can also include fiancés.

How to Write a Gift Letter?

While writing, keep a strict check on the following information and address it properly in the Mortgages gift letter. The lenders require detailed and clear information in a gift letter regarding:

  • The exact dollar amount of the gift
  • The address of the property is concerned with the down payment
  • The donors signed a statement that no repayment is expected
  • The date when the fund’s transfer is scheduled
  • The donor’s account details, including the name of the bank or Investment Company, the account number, and what type of account it is like checking, savings, or investment
  • The relationship between the donor and the borrower
  • The donor’s name, telephone number, and full address are complete details
  • The dated signatures of the donor and the borrower both.

The durability of the Mortgage Gift

Usually, mortgage gift letter validity lasts for up to three months. Lenders normally consider a mortgage gift letter valid for 90 days. 

The lender might need another letter if the money was gifted more than 90 days ago. The renewal of mortgage gift letters is demanded quite less because most down payments usually happen during a short time, within 90 days.

Final Words

A mortgage gift letter is undoubtedly a great benefit if you are going to apply for a mortgage. It would be best if you first got into a detailed discussion with the lending party. 

Once all the conditions are fulfilled, you can proceed with the payments. All these affairs related to real estate are catchy and beneficial, but there are several risks associated with them. 

Carefully analyze every detail before finalizing an agreement. Never take any decision quickly, and do not get over-excited or overconfident while agreeing with the payment plan. Always evaluate your income stream and then make decisions accordingly.

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