I am buying an investment property from a family member for the $125k that they owe on it. The house appraises for $160k so I'm getting a $30k gift of equity to use as a down payment.
The lender is telling me that the sale price will be $125k and that is what they are going to pay off of the existing $125k loan and give me a mortgage for $95k. That is the sale price minus the $30k equity down payment but I am having trouble wrapping my head around it.
Can someone help me understand the lender paying out $125k and giving me a mortgage for $95k?
I am buying an investment property from a family member for the $125k that they owe on it. The house appraises for $160k so I'm getting a $30k gift of equity to use as a down payment.
The lender is telling me that the sale price will be $125k and that is what they are going to pay off of the existing $125k loan and give me a mortgage for $95k. That is the sale price minus the $30k equity down payment but I am having trouble wrapping my head around it.
Can someone help me understand the lender paying out $125k and giving me a mortgage for $95k?
They are saying that your relative will give you $30k in cash to put down as the down payment. You need to start over with a sales price of $160k. Then see if you can find a lender who will use the $35k equity / seller contribution to closing as the down.
Message I sent to my lender:
Based on what we talked about, the sale price of the house will be $125k with a $30k gift of equity down payment That means that you are going to pay off the existing $125k loan and write me a mortgage for $95k, end of story. I really like that plan but, to me, it seems like the numbers are expecting my mother and I to bring the $30k to the table at closing, which I can’t do.
In my mind, using round numbers, the sale price would be $155k minus the $30k gift of equity down payment for a mortgage on the remaining $125k.
This is the response I got:
The 30K is not in cash it has already been paid and is equity.
Thoughts??