If you’re a first-time homebuyer, gifted funds from family members are a way to make homeownership more accessible — especially when it comes to covering down-payment costs! While lenders are fully aware that family gifts play a crucial role in helping new buyers reach their goals, they also have guidelines in place to ensure transparency around these funds. Here’s what you need to know about using gift funds for your down-payment.
What is a gift letter?
A gift letter is a formal document that lenders require to verify that the funds you’re using are a gift, not a loan. This distinction is essential because lenders need to confirm that you are not taking on additional debt that could affect your financial stability in the future. For first-time homebuyers who may be relying on family support, the gift letter serves as a simple but important step in ensuring that these funds are in line with your lender’s requirements.
What is included in a gift letter?
To meet lender requirements, a gift letter should contain specific information that clarifies the details of the gift. Requirements may vary, but here is what lenders typically ask for in a gift letter:
- Donor Information: The letter should clearly list the full name and contact information of the person providing the gift. This transparency helps lenders confirm the legitimacy of the funds and understand where they’re coming from.
- Relationship to the Donor: Lenders prefer that gifts come from close family members. Stating the relationship within the letter helps ensure the gift is coming from someone who is truly invested in your success as a new homeowner. Some loan types may allow gift funds from close friends or other individuals, but it is best to confirm with your Loan Team directly.
- Statement of No Repayment: To confirm that the funds are indeed a gift, the letter must explicitly state that there is no expectation of repayment. This assurance is essential to demonstrate to the lender that your financial standing won’t be affected by additional debt.
- Source of Funds: Lenders will ask for information on where the gift funds came from.
- Signatures: Both the donor and the recipient should sign the letter to validate the agreement and confirm that all terms are understood and agreed upon by both parties.
While gift letters are a standard part of the mortgage process for many first-time homebuyers, requirements can vary depending on the type of loan you’re pursuing. To make sure everything is in order, it’s a good idea to consult with your Pulte Mortgage Loan Team, who can provide specific guidance on how to handle gift funds according to your loan’s requirements.
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