What the letter contains
Typical contents are the donor's name, address and relationship to the borrower, the amount of the gift, the date, the property address if known, and a statement that no repayment is expected. Many lenders supply their own form. Use that version.
The donor may also need to supply bank records that show the money moving.
Who signs
The donor signs, and in many cases the borrower signs too. If the notary is used, the donor appears with photo ID and signs as the notary observes, or acknowledges one already written, depending on the certificate.
Gifts from people who are not related to the borrower may be restricted by the lender. Ask the loan officer before preparing the letter.
The notary's limited role
The notary checks the ID, compares names, makes sure no blanks remain, and completes the certificate. The notary cannot vouch that the funds are real, that the donor is eligible, or that the lender will accept the letter.
Keep your questions about gift limits or taxes for the loan officer, a CPA or an attorney.
Timing and delivery
Lenders set deadlines, and gift letters are often needed days before closing. Ask whether a scan is enough or the original must be mailed. Some lenders accept electronic signature in place of a notary if it is part of their process.
If the donor lives elsewhere, remote notarization may help, where the lender allows it.
Avoid common problems
Mismatched names between the letter and bank statements, unsigned pages and amounts that differ from the loan estimate cause delays. Check that the letter matches the figures in the lender's file. Do not alter amounts by hand.
Donors should keep a copy of everything they sign, along with the transfer receipt.
Scenario: parents helping with a down payment
A couple buying their first home receives funds from the husband's parents. The loan officer sends a lender-specific gift form. The parents fill in the amount, their relationship, the property address and the statement that no repayment is required.
They sign in front of a notary, and send the letter back by email, then the original by overnight mail. The funds go from the parents' bank to the title company, and the transfer receipt goes to the lender. The underwriter matches the receipt to the letter.
Timing matters. If funds arrive after the lender's deadline, the file may stall. If the amount on the receipt differs from the letter, the underwriter may ask for a corrected letter. Ask the loan officer for a list of acceptable evidence, such as wire confirmations or bank statements showing both sides of the transfer.
Common questions
Is a gift letter the same as a loan?
No. A gift is not repaid. A loan is. The lender's rules look at the difference closely.
Does the donor need to attend closing?
Usually not. They only need to sign the letter and provide funds.
Will the gift be taxed?
Ask a CPA or enrolled agent. Rules depend on the amount and the donor's situation.
This guide is general information, not legal advice. Fees and procedures change; check with the office involved or an attorney for your situation.