Using gift of equity as down payment, loan structure?

14 Replies

Looking to see if someone can better explain this for me, say a home purchase price is 150k and 30k is needed for down payment, relative seller agrees to a gift of equity of 30k, so the lender approves the buyer for 180k.  I'm having a hard time figuring this out, would the loan be for 150k with 120k owed?

Is this in favor of the bank?  It's looking like it.  It seems as if they want to pull your equity, put it as dp and lock in a loan larger then it will technically sell for.  Am I right??

Huh? If the house appraises for $180k, and your family is willing to sell it to you for $150k, then your "down payment" would be $30k. If your wanting an 80%LTV loan, to avoid PMI, then the down payment on $180k would be $36k, so you'd need to put down an extra $6k. If you don't mind paying PMI, you don't need to put down anything more, if you qualify for the loan. To be clear, the bank will Not lend you more than the actual purchase price ($150k).

In my above example, if you put no more money down, you'd have a loan for $150k, 30 years, 4%, whatever. If you wanted to avoid PMI, and put down an extra $6k, then you loan would be for $144k.... Not sure what your question is regarding "structure".

Loan structure as in all the figures.  Home cost 150, appraises for 180, you pull equity.  Does the house lose its equity now?  What I'm having a hard time wrapping my head around. 

Just a thought:  Most lenders will require your down payment to be "seasoned" and not gifted from a seller, relative, or friend.  There are a lot of different lenders doing different things but a fannie mae loan will require this.  They are trying to avoid exactly what you are doing.  

@Sean Gallagher I know this is an old post, but I was wondering if you might be willing to share what you learned from this process. We are in a nearly identical situation my lender and accountant have both agreed this is a complicated one. I want to be sure we will fully understand all of the implications of this deal before we accept the terms. Feel free to message me.