Let's say you found it—the house of your dreams. It's in your price range, has all of the features you've been searching for, and is in the perfect area! You're ready to go ahead and sign the papers, but your bank account isn't. Don't fret; if a loved one has offered to help with your down payment, there's still a way for you to get your dream home.

What Is a Gift Letter?

A mortgage gift letter is a signed, written form of communication indicating the money you've received is a gift and there is no repayment required. A gift letter's primary use when purchasing a home is to help the purchaser with a down payment. 

Why Does It Matter?

Lenders calculate your debt-to-income ratio when determining how much you can afford to spend on a house. Let's say a family member decides to pay for your down payment now but would like you to reimburse them within a year. Now you have another debt to pay back on top of your mortgage payment and other possible debts. Lenders may find that the risk of defaulting on your mortgage payments is higher with the extra obligation, and not want to lend to you. 

However, if your loved one decided they wanted to gift you the money without you repaying them, that wouldn't change your debt-to-income ratio. You can now prove to the lender that you do not have to repay the gifted money with the gift letter, which changes nothing in the previous terms of your pre-approval.

How to Use Yours

If you're ready to start the mortgage process, remember to ask me about the gifted down payment option as each lender has slightly different requirements and their own template. The information they will be asking for is as follows:

  • The full name, address and phone number of the gifter
  • Their relationship to you
  • The dollar amount of the gift
  • The date of transfer 
  • The signature of the donor
  • The purchase property address

It's my job to help you find the mortgage that best suits your financial needs. Call (306) 220-0425 to make an appointment with me or visit my website for more information.