Having come across the problem of down payment or mortgage gift many people try to search this information on the Internet. First of all, there are some legal peculiarities, not every lay client knows about. Secondly, you may not be absolutely sure that the gift letter template available free in some sites is what you need. Thirdly, just using the gift letter mortgage template you do not have a guarantee that what you are doing is legal. That is why we considered it necessary to assist our followers and explain some details about the gift letter for a mortgage.
Almost everybody knows that when buying a home, the highest upfront expense is usually down payment. Although potential homeowners can hope to cover monthly mortgage payments taking into consideration their regular earnings, the initial cost of purchasing a house or an apartment may be rather high for them to pay alone. Some specialists in finance say that gift letters become more and more popular, especially among millennials. Even if they make good money, it can be difficult for them to save for a down payment. Only a few home buyers are able to cope with down payment primarily with their own savings. First-time buyers who cannot sell their current place of living and make enough money for initial payment get lost because this situation seems to be a deadlock.
This article and mortgage gift letter template, as well as gifting letter template enclosed, may help those people who are interested in this issue. That’s where a down payment gift comes in — if someone wants to chip in and help a friend or family member buy a home, they can do so. However, there are strict rules and regulations when it comes to such a transfer of cash. Here’s what you need to know about mortgage gift letters.
First, a gift letter for a loan shall determine the relationship of a donor and a donee. Only if a mortgage gift letter is signed by a friend, family member or governmental organization, this deal will be considered legal. Secondly, this scheme shall be transparent absolutely to exclude any frauds or dishonest steps of the parties involved.
You can use gifted funds to make a down payment, but your mortgage lenders may want to know some details before they allow you to use it. Be honest and never mislead a lender giving some wrong information or keeping some facts a secret. In case you cancel the transaction of a mortgage gift the probability of the lender of yours to refuse your mortgage is quite high.
If you plan to get gift funds from a friend or family member, you’ll need a gift letter form filled in by that person and certified by the lawyer having appropriate qualifications. You should remember that money is a gift and not expected to be repaid. The point is that in case any annulment of the gift letter for mortgage down payment takes place it is interpreted as a crime by law. It can also put your loan reputation at risk as all loans need to be fixed in your debt-to-income ratio.
Gift money letter is not proof enough reliable for a lender. The lender may also require further evidence of the gift — for instance, they may ask to see the gift-giver’s bank statements or a bank slip from the buyer’s account to learn the date when money was transferred.
Oftentimes, gifts change hands during the application process — this gives time for the money to show up on both the giver and the buyer’s bank statements as well as gives the mortgage lender time to verify that the cash is from a legitimate source.
All these recommendations are preliminary, and in case you or your friends or relatives would like to use this option you need to apply to the lawyer specializing in mortgage gifts.