Gift Letter Template for a Mortgage

When a family member helps you buy a home, the money almost never moves without paperwork. Mortgage lenders want proof that cash landing in your account is a gift and not a loan you will have to pay back. That proof is a gift letter: a short signed statement from the person giving you the money.

It sounds simple, and it is, but a gift letter that is missing a detail or contradicted by your bank statements can stall an approval days before closing. This guide explains what a gift letter is, when you need one, who is allowed to give you money, exactly what the letter must say, and the mistakes that trip up borrowers.

What Is a Gift Letter?

A gift letter is a written document in which someone confirms they have given, or will give, money to a borrower with no expectation of repayment. It is most often used for a mortgage down payment, closing costs, or reserves, but the same document shows up for student loans and other large transfers.

The letter matters because of how underwriters think about money. When they review your application, they add up your debts and compare them to your income. A loan increases your debt and shrinks how much home you qualify for. A gift does not. So before a lender lets you use someone else's money toward a purchase, they need a signed promise that the money carries no strings.

A gift letter is not the same thing as a contract. Nobody is agreeing to do anything in exchange for anything. It is a one-way declaration by the donor, and its whole job is to satisfy the lender's documentation rules.

When Do You Need a Gift Letter?

You need a gift letter any time part of your funds to close comes from someone other than you. The most common situations are:

• Down payment help. A parent covers part or all of your down payment.
• Closing costs. A relative pays for appraisal, title, and lender fees.
• Cash reserves. Some loans require you to have a few months of payments in the bank after closing, and gifted money can count.
• Earnest money. If a gift covers your deposit, that transfer is part of your paper trail too. See our guide to the earnest money agreement for how that deposit fits into a purchase.

If the money is already sitting in your account and has been there for a while, you may not need a letter for it. Lenders look at recent deposits, so a gift that arrived months before you applied is usually treated as your own money. The trigger is a large, recent, unexplained deposit.

Who Can Give Gift Funds?

Not everyone can be a donor, and the rules change by loan type. This is one of the most common places borrowers get surprised.

Conventional Loans

Fannie Mae and Freddie Mac loans generally require the donor to be related to you: a parent, grandparent, sibling, child, spouse, fiancé, or domestic partner. The relationship usually has to be stated in the letter.

FHA Loans

FHA is more flexible. Acceptable donors include family members, an employer or labor union, a close friend with a clear and documented interest in your life, a charitable organization, or a government agency running a homebuyer program.

VA and USDA Loans

These programs allow gifts from most sources as long as the donor is not connected to the sale. Because these loans can require little or no down payment, gifts are more often used for closing costs and reserves.

Who Can Never Give a Gift

Across every program, the donor cannot be anyone who profits from the transaction. That rules out the seller, the builder, the developer, the real estate agent, and the lender. Money from those parties looks like a hidden discount or kickback, and underwriters reject it.

What a Mortgage Gift Letter Must Include

Lenders have seen thousands of these, and they know what a complete one looks like. A gift letter should contain:

• The donor's full name, address, and phone number.
• The donor's relationship to the borrower (mother, uncle, fiancé, and so on).
• The exact dollar amount of the gift.
• The date the funds were or will be transferred.
• The property address the gift is being applied to.
• A clear statement that the money is a gift and no repayment is expected or required.
• The source of the funds, such as the donor's checking or savings account.
• The donor's signature and the date signed.

That repayment sentence is the most important line in the letter. If the language is fuzzy, an underwriter may read it as a loan and count it against you, which is the exact outcome the letter is supposed to prevent.

How to Write a Gift Letter: Step-by-Step

Step 1: Ask your lender for their template first. Many lenders have their own form. Using theirs avoids a back-and-forth over wording. If they do not have one, the structure below works.

Step 2: Identify the donor and borrower. Full legal names for both, plus the donor's contact information. The lender may call the donor to verify the gift, so the phone number needs to be real and current.

Step 3: State the amount and the property. Write the exact figure and the address of the home. Round numbers are fine, but the amount must match what actually lands in your account.

Step 4: Declare it a gift. Use plain, direct language: "This is a bona fide gift. There is no obligation, expressed or implied, to repay this money in cash or in services, now or in the future." Ambiguity here is what causes problems.

Step 5: Name the source of the money. Note which account the funds come from. This lets the underwriter match the letter to the donor's bank statement.

Step 6: Sign and date. The donor signs. Some lenders want the borrower to sign as well. Ask whether they need it notarized before anyone signs.

Step 7: Attach the proof. Pair the letter with a copy of the donor's bank statement or the wire receipt showing the money leaving their account.

Documenting the Gift: The Paper Trail

The letter is only half the job. Lenders verify that the money moved the way the letter says it did, so how you handle the transfer matters as much as the words on the page.

Keep the transfer clean. A wire or a single check is easy to trace. Cash is not. If the donor hands you an envelope of bills, the lender has no way to confirm where it came from, and the gift may be rejected.

Match the amounts exactly. The deposit in your account should equal the figure in the letter. If the letter says 15,000 dollars and 15,400 shows up, expect questions about the extra 400.

Show both sides. Underwriters often want to see the money leave the donor's account and arrive in yours. That means a statement from the donor and a statement from you covering the same transfer.

Watch the timing. Deposit the gift after you have a signed letter, not before, and keep every receipt. A gift that appears and then partly disappears before closing looks like it was really a loan being repaid.

Gift Letters and Taxes

Two worries come up constantly, and both are usually smaller than people fear.

The person receiving the gift owes no income tax on it. Gifts are not income.

The person giving the gift may have a filing obligation, but usually no actual tax. In 2024 a donor can give up to 18,000 dollars per recipient per year without filing anything (the figure is indexed for inflation, so check the current year). A married couple can combine their exclusions to give more. Above the annual exclusion, the donor files a gift tax return, but the excess counts against a multi-million-dollar lifetime exemption, so writing a check rarely triggers a bill. When the numbers are large, the donor should talk to a tax professional rather than guess.

Common Mistakes to Avoid

Calling it a loan by accident. The single most damaging error is language that hints at repayment. If a donor "expects to be paid back someday," it is not a gift, and it belongs in a loan agreement instead.

Getting the amount wrong. A letter that does not match the deposit forces a correction, and corrections take time you may not have close to closing.

Depositing cash. Untraceable money undermines the whole document. Move funds electronically or by check.

Using an ineligible donor. A gift from the seller or agent will be thrown out no matter how the letter is worded. Confirm the donor qualifies before you build your budget around the money.

Forgetting the donor's bank statement. The letter without proof of funds is incomplete. Have the statement ready.

Signing before checking notarization rules. If your lender wants it notarized and you already signed, you get to do it twice.

Gift Letter vs. Loan: Know the Difference

A gift and a loan are opposites in the eyes of an underwriter, and picking the wrong one has real consequences.

A gift carries no repayment. It lowers the amount you have to borrow without adding to your debt load, which is why lenders scrutinize it so carefully.

A loan from a family member is still a loan. It adds a monthly obligation, and if it is not disclosed it can be treated as mortgage fraud. When money genuinely needs to be paid back, document it properly with a promissory note that spells out the amount, interest, and repayment schedule. Trying to pass a loan off as a gift to qualify for a bigger mortgage is exactly the kind of thing lenders look for.

If your lender requires the gift letter to be notarized, our notarized letter guide covers how to get a signature witnessed and what the notary block should look like.

When to Use a Gift Letter

• Buying your first home with help from parents or grandparents
• Covering closing costs with money from a relative
• Meeting a reserve requirement so the lender sees enough cushion after closing
• Funding earnest money when the deposit comes from a family member
• Documenting any large recent deposit a lender flags during underwriting

The rule of thumb: if someone else's money is helping you close and you cannot show it has been yours for a while, you probably need a gift letter for it.

Related guides

• Private Mortgage Agreement Template & Guide
• Letter of Instruction Template: Key Fields
• Resignation Letter Template: How to Write One
• Letter of Indemnity Template: What to Include
• Notarized Letter Template: How to Write One

Generate Your Gift Letter with Contractable

A gift letter is short, but getting the wording exactly right for your lender and loan type is where borrowers stumble. Contractable generates a clean, lender-ready gift letter in seconds, with the correct repayment language, donor details, and property information filled in for your situation. No templates to hunt down and no guessing about what your underwriter needs.