Which statement about gift letters is true?

• A. It confirms the loan terms.
• B. It is required only for gift funds exceeding a threshold.
• C. It allows repayment of the gift over time.
• D. It states that down payment funds are a gift, donor details, amount, and that there is no repayment obligation.

Answer: (D)

A gift letter documents that the down payment funds come as a gift, not a loan. It should name the donor, describe their relationship to the borrower, specify the exact gift amount, and include a clear statement that there is no obligation to repay. This helps the lender verify the source of funds and ensures the down payment isn’t treated as borrowed money that could affect debt obligations or repayment calculations.

This is why the statement is the best fit: it captures the essential purpose and required details of a gift letter, which are specifically about confirming the gift, identifying the donor and amount, and affirming there’s no repayment obligation. Gift letters aren’t about confirming loan terms, they aren’t tied to a threshold, and they don’t permit repayment of the gift over time.