Check with your lender to see if all or part of the down payment can be covered by a gift from a third person. If you have a relative who is willing to help you with the down payment, get a gift letter from that relative (along with the gift) stating that you do not have to pay back the money. How much of your own money you will need depends on the type of loan you are seeking and the lender’s policy (which usually contains a minimum credit score requirement).
If you are using a gift as part of your down payment, ask the lender for the form gift letter it wants you to use. There is no standard form used by all lenders.
A gift letter must contain the following items.
• The names of the donor (giver of the gift) and the donee (receiver of the gift).
• Whether the gift has been given or only promised. The lender may require that it be given before accepting the letter.
• The purpose of the gift (to help purchase the home). The property address is also given in this section.
• A statement that no repayment is required or expected, either in cash or future services. (Although by definition a gift does not have to be repaid, lenders want it emphasized.)
• The relationship of the donor to the donee, such as parent or sibling. The donor may also be a nonprofit organization that helps low-income buyers or those having specific jobs.
• The date and signature of the donor and an acceptance and signature of the donee. Notarizing the signatures is usually not required. If it is, your lender will most likely have a form for you to use.
The lender may also require that the donor disclose the source of the funds, such as the sale of stock, a savings account, etc. There may also be a statement that no party to the sale, such as the seller or real estate agent, is the real source of the gift.
If the lender does not provide a form, use the sample one provided. Ask the lender to approve it before you get it signed.
Most lenders want you to have at least 5% of your own money in the deal. You will have to show proof that the money is yours, and not borrowed or a gift. Bank statements showing regular deposits to a savings account or a letter from your employer stating that you were paid a bonus are examples of what you may need to show your lender.