A simple example
If the home is worth $300,000 and Mom and Dad sell it to you for $270,000, the $30,000 difference may be treated as a gift of equity, subject to the loan program and transaction requirements.
Buying a Home
What the heck is a gift of equity?
A gift of equity happens when an eligible family member sells you a home for less than its appraised value and gifts you some or all of the difference in equity.
How the equity may help
The permitted gift of equity may be used toward the down payment, closing costs, or other eligible requirements. No one transfers $30,000 into your bank account, and a true gift is not repaid.
The paperwork matters
The eligible donor relationship, sales contract, gift letter, appraisal, settlement statement, and minimum borrower contribution rules all depend on the loan program. The transaction must be structured correctly from the beginning.
Talk to the lender before the contract
A gift of equity can be a powerful homebuying tool, but trying to fix the contract after everyone signs is the mortgage version of choosing chaos. Have me review the plan before the price and credits are finalized.
Written by Marta Lillard
25+ years of mortgage experience, explained in plain English.
Mortgage Broker · First Coast Mortgage Funding · NMLS #879436 · Licensed in Florida and Georgia
Questions about your options?