I am new to real estate investing but have worked in property management for 5 years. I am looking at purchasing my 1st rental property from my grandmother. I live and work in Columbus, OH and the property is in Cleveland, OH so I am unable to purchase this as an owner-occupied property. I am trying to use a gift-of-equity towards a portion of the down payment. I have called different lenders/brokers and seem to get different answers. Some have told me that as of January 1st, 2020, Fannie and Freddie no longer allow GOE to be used for an investment property.
Does anyone know of a mortgage option for using a gift of equity towards a down payment of an investment property?
Fannie and Freddie have changed a lot of their standards since COVID hit. Have you contacted any commercial lenders? The rates will likely be higher than conventional but they might have a product catered more towards this situation @Julia Petrac.
@Zeke Liston Thank you for your reply! So far I have only contacted conventional lenders and brokers, but that is a great idea! I will absolutely reach out to commercial lenders to see if there are options for my situation.
@Cameron Tope Thank you for your reply! The GOE will be about $20,000 and although I do not currently own another property or high value asset, I have cash assets. I am hoping to combine the GOE with a smaller addition of cash as the down payment to keep the remainder for repairs and reserves.
A “gift of equity” refers to a gift provided by the seller of a property to the buyer. The gift represents a portion of the seller’s equity in the property, and is transferred to the buyer as a credit in the transaction. A gift of equity is permitted for principal residence and second home purchase transactions. The acceptable donor and minimum borrower contribution requirements for gifts also apply to gifts of equity..
@Cameron Tope Thank you for your reply! The GOE will be about $20,000 and although I do not currently own another property or high value asset, I have cash assets. I am hoping to combine the GOE with a smaller addition of cash as the down payment to keep the remainder for repairs and reserves.
Got it! Then you should be fine signing a document that your gift from your parents is not a loan but a gift that will not need to be repaid.
Very wise to keep some cash for repairs and reserves!