What is it?
A way for family members to sell their home to another family member AND use equity in the home to help buyer pay down payment & closing costs for the purchase of the home.
How does it work?
Using a “gift letter” the seller can choose to “gift” some of the equity in their home to the buyer, to use for down payment & closing costs. There are no limits to the amount that can be given. As with any home sale, any current mortgage must be paid off at closing.
Seller and buyer agree to a purchase price. A purchase agreement is signed. An appraisal will be done and the rest of the process is like a typical home sale/purchase.
Can it be used with FHA and RD (Rural Development) loans?
Yes!
Benefits of using a “Gift of Equity”:
Helps 1st time home buyers with the down payment and closing cost requirements for their mortgage.
No transfer taxes for seller to pay at closing.
No prorated taxes for buyer to pay at closing.
I have a GREAT lender that is very knowledgeable about using a Gift of Equity in the purchase of a family home. Contact me for more information.