Gift letters are required whether you're buying a home to live in or an investment property. It also helps speed things for your real estate agent. Use a mortgage gift letter to add a legal paper trail that ensures any funds you receive are free and clear of encumbrances. Your bank is trying to make sure you can pay your mortgage, and adding an additional debt makes that less likely. Loans aren’t allowed to be used for a down payment because they add to your debt load. Gift letters reassure your bank that the money you’re receiving is a gift, not a loan. This might seem an odd request, but your mortgage company has good reasons for asking. If you’re receiving funds from an outside source to help with your down payment, you need to disclose how much you’re receiving, who gave you the money, and how they’re related to you. When you're using your own funds, your bank can be certain of where the money is coming from. The last thing they want to do is make a loan that ends in default. Banks are very careful to confirm that mortgagees have the necessary income to cover their monthly payments.
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