Gift Letter
Direct definition
A gift letter is a signed statement confirming that money given toward a home purchase is a genuine gift, not a loan that must be repaid.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
When part of a down payment or closing costs comes from a relative or other approved donor, lenders typically require a gift letter stating the funds don't need to be repaid, along with documentation showing the money moved from donor to borrower.
Why it matters
Lenders need to confirm gifted funds aren't a hidden loan, since that would change the borrower's true debt obligations and risk profile.
Where you may see it
- Underwriting file
- Closing package
- Down payment sourcing documentation
A real-world example
Educational and illustrative only
A common misunderstanding
A gift letter alone is often not sufficient — lenders usually also want to see paper trail evidence of the funds moving between accounts.
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- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026