A Gift Letter Template for a Conventional Loan is essential when you receive financial assistance for your home’s down payment or closing costs. For conventional loans, which are private loans not backed by government programs, lenders require proof that the gift money is not a loan disguised as a gift to ensure your debt-to-income ratio remains accurate.
The letter must include the donor’s full name, address, and phone number; the recipient’s (borrower’s) name and property address; the exact gift amount; the purpose of the gift; and a clear statement that repayment is not expected. It should be dated and signed by the donor(s). Some lenders also require proof of the gift funds’ source and that the money is seasoned in your account (typically for at least 60 days) to confirm legitimacy.
Only close relatives such as parents, grandparents, siblings, and sometimes fiancés or domestic partners can provide acceptable gifts for conventional loans. Gifts from friends or employers usually don’t qualify.
The process begins by informing your lender early about the gift funds, transferring the money into your bank account, drafting and signing the gift letter, and submitting it with the necessary financial documents to your lender for verification.
Common mistakes include failing to disclose gift funds, using incorrect templates, or implying repayment, all of which can delay or derail your loan approval.
For further details on gift funds and related mortgage topics, see our articles on Mortgage Gift Funds and Down Payment.
Different loan programs have varying rules on gift funds; for example, FHA loans allow gifts from a broader range of donors, while VA and USDA loans have different requirements or no down payment mandates.
For official IRS information on gift tax rules, donors should review IRS Publication 559 and Form 709 instructions at IRS.gov. This helps donors understand any tax implications when gifting amounts exceeding the annual exclusion ($18,000 in 2024). Recipients do not owe gift tax.
Using a proper gift letter template helps streamline your mortgage approval, providing transparency about your financial support and securing your path to homeownership with a conventional loan.
