Gift Letter
A Gift Letter is a written document that confirms money given by a family member or approved donor for a home purchase is truly a gift and not a loan requiring repayment. The letter must specify the gift amount, donor relationship, and explicitly state no repayment is expected.
Example
“The lender required a gift letter from Sarah's parents confirming that the $20,000 for her down payment was a gift with no expectation of repayment.”
Memory Tip
Think 'Gift Letter = Generous Inheritance For Totally Legitimate Entry into Real estate' - it proves the money is truly free with no strings attached.
Why It Matters
Lenders require gift letters to verify that borrowed money isn't being disguised as a gift, which would affect debt-to-income calculations and loan approval.
Common Misconception
Many believe any family member can provide a gift letter, but lenders typically only accept gifts from immediate family members like parents, siblings, or grandparents.
In Practice
When Sarah's parents gave her $20,000 for a down payment, her lender required a signed gift letter stating the funds were a gift, not a loan, before approving her mortgage.
Etymology
The term combines 'gift' from Old Norse 'gipt' meaning something given freely, with 'letter' from Latin 'littera,' creating a document that proves money was truly gifted, not loaned.
Common Misspellings
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