Gift Letters for Mortgages in Alabama | The Harris Firm LLC

Family Is Helping With the Down Payment. The Lender Needs It in Writing, and Needs It Right.

A gift letter tells the lender who gave the money, how much, and that it never has to be paid back. Get the wording, the sourcing, or the timing wrong and the closing slips. The Harris Firm LLC drafts gift letters to the lender’s requirements and walks families through the paper trail. Phone consultations are free.

Lenders do not object to gifted down payments. They object to money they cannot trace. A gift letter is one page; the documents behind it are the part families get wrong, and a rejected gift package a week before closing is a bad way to learn the rules.

What the Lender Requires, Line by Line

Every gift letter contains the same elements, and underwriters check each: the donor’s full name, address, and phone; the borrower’s name; the relationship between them; the exact dollar amount; the date the funds were or will be transferred; the address of the property being purchased; the donor’s account from which the gift is drawn; and a statement that the funds are a gift with no repayment expected, express or implied. The donor signs; many lenders want the borrower to sign too. Some require notarization.

Behind the letter sits the sourcing. The lender will ask for the donor’s bank statement showing the funds were available, the transfer record (wire confirmation, cancelled check, or a copy of the check with the deposit slip), and the borrower’s statement showing the deposit. If the donor moved money into their own account shortly before the gift, the lender may ask where that came from too. The cleaner and shorter the trail, the smoother the closing.

Timing matters. Funds gifted well before the application and seasoned in the borrower’s account for two or more statement cycles often need less documentation; funds arriving during underwriting need the full package. Gift funds that go directly to the closing agent at settlement have their own rules. We tell you which path fits and prepare the letter for the lender’s form, since a letter that omits one required element is returned. Our gift transfers page covers the broader planning.

Who Can Give, and What Trips Families Up

Program rules change and lenders add their own overlays. We confirm the current requirements with your loan officer before drafting, so the letter matches what the underwriter will actually check.

Tax, Timing, and the Donor’s Side

Gift tax. The donor, not the borrower, is the one with any reporting obligation. A gift within the federal annual exclusion needs no return. A gift above it, say $50,000 from parents toward a first home, requires the donor to file a Form 709 with their tax return, which reduces their lifetime exemption but almost never produces tax. Two parents can each give the exclusion amount to each of two spouses, which covers most down payments with no return at all.

Medicaid. A large gift by an older parent is a gift for Medicaid’s five-year look-back. If the donor may need long-term care within five years, the down payment gift can create a penalty period. The gift is still worth making in many cases, but the family should know before, not after.

Estate planning. A significant gift to one child often should be reflected in the parents’ will as an advance against that child’s share, or explicitly not, so siblings are treated as the parents intend. Our will attorneys add that provision when the gift letter is prepared. A gift affidavit for the family’s records is a good companion to the lender’s letter.

Getting the Gift Letter Right

Usually ready within a day or two, and worth doing before the lender asks rather than after.

Mortgage Gift Letters — Frequently Asked Questions

Get the Gift Letter Right the First Time. Free Phone Consultation.

One free call confirms the donor qualifies, flags any tax or Medicaid issue, and quotes the flat fee for the letter and the paper-trail checklist.