Question:

When is a Gift of Equity purchase possible and what are their characteristics?

Answer:

You have to be buying a home from a family member to use a Gift of Equity Purchase program. That is, your parents or siblings might be moving to Europe, or willing to make you a wedding gift.

Through the Gift of Equity loan approval process you'll get a gift of equity letter and it is possible to avoid the down payment completely.

Gift of Equity programs are available with many lenders and are also called Buying a House From Family Members programs.

Most Common Features of the Gift of Equity Mortgage Loans

  • These loans close faster than the others. 
  • Your relatives will offer the house to you at below market price and this is when the lender is willing to accept the difference between the actual house value and the sale price as down payment.
  • Most often, it is possible to avoid paying PMI (private mortgage insurance) with Gift of Equity loans because the Loan to Value (LTV) ratio usually drops to at least 80% with those Gift of Equity mortgages.
  • Lenders offering Gift of Equity home loans usually consider applicants with excellent to poor credit.
  • As with many mortgages, you can get a Gift of Equity loan applying through the Internet, or calling the lender toll free. It's made easier to do than ever.
  • All mortgage loan general features apply to Gift of Equity loans - you can get a fixed or adjustable rate mortgage with full or reduced documentation, etc.
  • Gift of Equity home purchases are usually available to all credit profiles (1st time homebuyers or others).
  • Even though Gift of Equity home mortgage purchases are available through large lenders, as well, it may be better to find a lender specializing in Gift of Equity (Purchase Home From Family Member) programs.
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