If a relative or friend will be giving you money to help make a down payment on or purchase a house, your bank and lender will likely require some type of written documentation that the money is in fact a gift, not a loan.
The reason is that if it's a loan, you will be deeper in debt than the bank had earlier calculated. In that case, you may no longer qualify for the same loan terms the bank had offered, or perhaps any loan at all.
Here's a sample gift letter you can use to prove that the money is truly meant as an outright gift, with no expectation of repayment.
Before finalizing the letter, check with your lender to make sure that it includes all information the bank requires, such as evidence of the donor’s ability to provide these gift funds.
To: [name and address of bank or lender]
I/We [name of gift-giver(s)] intend to make a GIFT of $ [dollar amount of gift] to [name(s) of recipient(s)] , my/our [relationship, such as son or daughter] , to be applied toward the purchase of property located at: [address of the house you’re buying, if known] .
There is no repayment expected or implied in this gift, either in the form of cash or by future services, and no lien will be filed by me/us against the property.
The SOURCE of this GIFT is: [describe the investment, bank, or other account the gift is coming from] .
Signature of Donor(s): _____________________________
Print or Type Name of Donor(s):
Address of Donor(s): Street, City, State, Zip:
Telephone Number(s) of Donor(s):
Email Address of Donor(s):