That distinction, between a genuine gift and loan fraud, is precisely why lenders require a so-called "gift letter" to document that any gift you get is in fact genuine.
Real estate fraud refers to any illegal activity with the purpose of misrepresenting information on a mortgage loan application or other real estate-related documents involving the transfer of money. Real estate fraud is also commonly referred to as mortgage fraud, since the mortgage application is usually where the fraud takes place. Predatory mortgage lending, while it is a dishonest real estate practice, is generally not referred to as real estate fraud, in order to distinguish it from fraud that is committed by a buyer. In the United Sates, real estate fraud can carry heavy penalties, including large fines and imprisonment.
There are many ways in which to commit real estate fraud, especially during times when the price of real estate is on the increase. Some types, because of their simplicity, are seen more often. Others are more complicated and are less common, but no less serious in the eyes of the law.
Some buyers provide a down payment using money that has been given to them as a gift, often from relatives. This is an acceptable way to make a down payment, but if the buyer repays the gift to the person who provided it, that is considered real estate fraud. In order to be legitimate, a down payment that is gifted cannot be repaid. Accidental failure to disclose financial liabilities on a mortgage application is also considered mortgage fraud if it is not remedied before the loan is given.