Definition
A gift letter is a written statement from donors confirming funds are a gift with no repayment expectation. Lenders require this to distinguish gifts from borrowed funds that would increase your debt obligations. It's simple documentation but critical.
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Lenders require gift letters to ensure down payment funds aren't borrowed loans that would increase debt obligations.
Pro Tip
Prepare gift letters early in application process to avoid closing delays.
Example
Parents write letter confirming $50,000 is a gift to child for down payment.