Gift of Equity Letter Template
For family home sales below appraised value, documents the equity gifted at closing.
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[Seller/Donor Full Name(s)]
[Address]
[City, State ZIP]
[Phone] · [Email]
[Date]
[Lender / Mortgage Company Name]
Attn: Underwriting Department
[Lender Address]
[City, State ZIP]
RE: Gift of Equity, Sale of [Property Address] to [Buyer Full Name], Loan No. [Loan Number]
To Whom It May Concern:
I/We, [Seller Full Name(s)], am/are selling the property located at [Property Address, City, State ZIP] to [Buyer Full Name], who is my/our [relationship, e.g., son], for a purchase price of $[Purchase Price]. The property’s appraised value is $[Appraised Value].
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When to Use This Template
Use this when selling a home to a family member for less than its appraised value and gifting the difference as their down payment. The letter states the price, the appraised value, and the equity amount, and confirms it appears on the closing statement.
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Get Complete Library for $119Frequently Asked Questions
What is a gift of equity?
When someone, almost always a family member, sells you a home for less than its appraised value and gifts you the difference. The gifted equity typically covers some or all of your down payment without cash changing hands.
How is a gift of equity documented?
Three places: a gift of equity letter signed by the seller, the purchase contract reflecting the price, and the closing disclosure showing the equity credit. The lender will also order an appraisal to establish the value.
Which loan programs allow gifts of equity?
Most major programs allow them between family members, conventional and FHA commonly. Program rules differ on eligible relationships and how much can be credited, so confirm with your lender before writing the contract.
Does a gift of equity have tax consequences?
It can. The gifted equity counts as a gift for IRS purposes, amounts over the annual exclusion may require the seller to file Form 709, and selling below market value affects the seller's and buyer's cost-basis math. Talk to a tax professional before closing.
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Important Disclaimer
This template is provided for informational and educational purposes only and does not constitute legal, financial, medical, or professional advice. Every situation is unique. You should consult with a qualified attorney or licensed professional before sending any formal correspondence, especially for matters involving legal rights, government agencies, financial disputes, employment issues, or family court proceedings. Use of this template does not create an attorney-client or professional-client relationship. Formal Letter Templates is not a law firm and does not provide legal services.