Gift Letter for Down Payment (Template, Format & Example)

Depending on your mortgage loan, you could be required to pay 3 to 20 percent of the purchase price as a down payment for a home. This can be a huddle for many home buyers. Fortunately, you don’t have to pay for everything on your own. You can request gift money from a close friend or relative to put down your down payment on your dream home.

When you receive gift money to pay for a house, you have to accompany it with a gift letter. This will assure your lender that you are under no obligation to pay back the money. A lender is likely to reject your mortgage application without this letter.

Are you planning to gift someone with money to purchase a house? Here is all you need to know to draft an effective Gift Letter for Down Payment.

Your mortgage lender will require documentation to prove that you can access the down payment amount. They will also need to know that the amount is not a loan. Therefore, your gift letter should stipulate the following:

• The giver’s name, address, and contact information
• The recipient’s name
• The relationship between the giver and the recipient
• The exact gift amount in dollars
• The intended purpose of the gift
• The address of the property for which the recipient is making a down payment
• A statement affirming that no payment is expected for the gift

Most mortgage lenders prefer to be the only source from which you are borrowing. Consequently, they might reject a gift amount if it is not accompanied by a well-written Gift Letter for Down Payment from the recipient. Here are some guidelines for drafting this letter:

• As the giver, provide your name, address, and contact information at the beginning of the letter. This will affirm that your gift is legitimate.
• Generally, only close friends and family can provide a gift. Mention how you know the recipient in the first paragraph.
• State the exact gift amount in dollars that you are offering the recipient. Avoid vague terms like ‘a lot of money’ or ‘a handsome sum.’
• State the purpose of the gift. In this case, explain that the gift amount will be used as a down payment for a property.
• Provide a statement confirming that you do not expect repayment.
• Provide your bank details.

Gift Letter for Down Payment (Word Template)

A gift letter for down payment certifies that the money you have received is a gift. It should explicitly mention that you are not expected to pay it back. Without one, your mortgage lender will consider the amount of another loan and likely deny your application.

As a gift letter is a formal document, it should be drafted using professional language. Get to the point and mention essential details such as your relationship to the recipient, amount offered, and the source of the gift. Some lenders will require additional information.

Finally, always include your official name and signature to legitimize the letter.