Thursday, 12 May 2011 14:21
If you are purchasing a home to be a primary or secondary residence from a relative, the equity in the property could be used as down payment if it is gifted from the related seller. If the equity is less than 20%, the buyer must contribute at least 5% of the price to the transaction but if the equity is 20% or more, the buyer does not need to contribute towards the down payment. The gift of equity must be documented via a executed gift letter and must appear on the HUD-1 settlement statement. The gift of equity must also be a true gift and no repayment required or expected to the seller. Finally there must be no pattern of delinquency within the last 12 months on the subject property’s mortgage(s) to prove the transaction is not a foreclosure bailout situation. For more details on gift of equity purchases, contact us.