Gift equity programs

The gift equity approach is similar to the preceding seller-second option, except that the transaction is between relatives and the down payment is completely waived.

The sales transaction will only require a first mortgage from the lender. The remaining equity will be gifted from the seller to the borrower.

To adapt the preceding example with Joan, consider that the seller is her father Don, who wants to unload the house for only $80,000, even though it is worth a lot more. Joan still obtains the mortgage loan of $80,000. But instead of a second mortgage, Don gifts the remaining $20,000 in available equity to Joan. This allows Joan to buy the property from a relative with absolutely no down payment.

  • 100,000 Actual appraisal value of property
  • 80,000 Purchase price between Joan and her father Don
  • 80,000 First mortgage loan amount, based on appraisal value of property
  • 20,000 Seller holds a second mortgage for a limited term

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