Definition
Gift funds are money from family members or others to help with down payment or closing costs. Lenders require a gift letter confirming the funds are a true gift with no repayment expectation. Undocumented gifts raise fraud concerns.
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Lenders require a gift letter stating the funds are a true gift with no repayment expectation. Gift funds can be from family members, but some lenders have restrictions on other sources. The donor may need to provide proof the funds are available.
Pro Tip
Ensure gift letters are properly executed and provided to the lender; undocumented gifts can raise fraud concerns and jeopardize the loan.
Example
A parent gifts their child $50,000 for down payment. The parent provides a gift letter confirming no repayment is expected, and the child includes it with the mortgage application.