When it comes to buying a home or qualifying for a mortgage, there are certain requirements and documents that need to be submitted. One such document is the family member gift letter. This letter is a written statement from a family member who is gifting money to another family member for a specific purpose, such as a down payment on a house. In this article, we will discuss what a family member gift letter is, why you may need one, what to include in it, and how to write it.
What is a Family Member Gift Letter?
A family member gift letter is a legal document that serves as proof that a family member is giving a monetary gift to another family member. It is often required by mortgage lenders or banks when the recipient of the gift is using the money as part of their down payment on a home. The letter typically includes information about the amount of the gift, the relationship between the parties involved, and a statement that the money does not need to be repaid.
Why Do You Need a Family Member Gift Letter?
If you are using a monetary gift from a family member as part of your down payment on a home, you will likely need a family member gift letter. Mortgage lenders want to ensure that the money being used for the down payment is a gift and not a loan that will need to be repaid. The letter helps establish that the money is a gift and provides documentation for the lender.
What to Include in a Family Member Gift Letter
When writing a family member gift letter, there are several important details that should be included:
- Names and addresses: Include the full names and addresses of both the gift giver and the gift recipient.
- Relationship: Clearly state the relationship between the gift giver and the gift recipient.
- Amount of the gift: Specify the exact amount of the monetary gift.
- Statement of gift: Include a statement that the money is a gift and does not need to be repaid.
- Date: Include the date the letter is written.
- Signature: Both the gift giver and the gift recipient should sign the letter.
By including these details in the family member gift letter, you ensure that it is complete and provides all the necessary information for the lender or bank.
How to Write a Family Member Gift Letter
Writing a family member’s gift letter is a straightforward process. Follow these steps to create a well-written and effective letter:
- Use a formal tone: The letter should have a professional and formal tone to convey its importance and legitimacy.
- Introduce the parties: Begin the letter by introducing the gift giver and the gift recipient, including their full names and addresses.
- State the purpose: Clearly state that the purpose of the letter is to document a monetary gift from the gift giver to the gift recipient.
- Include the amount and purpose of the gift: Specify the exact amount of the gift and explain its purpose, such as using it for a down payment on a home.
- Address repayment: Clearly state that the money is a gift and does not need to be repaid.
- Provide contact information: Include contact information for both the gift giver and the gift recipient, such as phone numbers and email addresses.
- Sign and date the letter: Both parties should sign and date the letter to make it official.
Following these steps will help you create a comprehensive and effective family member gift letter that meets the requirements of mortgage lenders or banks.
In conclusion, a family member’s gift letter is an important document when it comes to buying a home and using a monetary gift from a family member as part of the down payment. By understanding what the letter is, why it is needed, what to include, and how to write it, you can ensure that you have a well-documented and valid gift letter. Remember to consult with a legal professional or mortgage lender for specific guidance and requirements.