Question:

What is a Gift of Equity and what are the advantages?

Answer:

If your father is selling you a house for $350,000 when it is worth some $450,000 this is what a Gift of Equity is. A family member selling real estate property to you for below market value is gifting you the difference to count as downpayment.

Advantages of Gift of Equity Homeownership

This is a great way for young families to become 1st time homeowners. A lender who specializes in Gift of Equity transactions will be most effective for a smooth transaction.

Also, even if you have the cash for the down payment, you could invest it or use it for any other purposes. A Gift of Equity Mortgage is a great way to finance your future home and not use up savings on deposit for the house.

The home purchase with Gift of Equity from the seller to the buyer is described in the Gift of Equity Agreement (Letter). Download Gift of Equity forms from the web.

Another great benefit of Gift of Real Estate mortgage loan is that usually the gift supplies at least 20% of the sales price and you are spared PMI payments. Such a loan can also be used for debt consolidation.

Also, since LTV of Gift of Equity real estate loans is lower than the usual, borrowers get lower rates and even not-so-perfect credit qualifies them for great rates.

Recommended helpful present and future homeowners links:
Why: Refinance to a fixed rate loan while mortgage rates are still low.
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Why: Know and protect your credit report and score.
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Common misspellings: mortage and morgage