What Is — A Gift Of Equity When Buying A Home

A occurs when a homeowner sells their property to a family member or close relation at a price significantly below its fair market value. The difference between the home's appraised value and the actual sale price serves as the "gift," which lenders typically treat as the buyer's down payment. How it Works

The gift must be formally documented on the final settlement statement. Advantages and Disadvantages How Does the Gift of Equity Work? - Diamond Credit Union what is a gift of equity when buying a home

Unlike a cash gift where money is transferred to the buyer's bank account, a gift of equity involves no physical cash exchange between the parties. Instead, the seller "donates" a portion of their equity as a credit at closing. Appraised Value: $400,000 Agreed Sale Price: $320,000 Gift of Equity: $80,000 (effectively a 20% down payment). Core Requirements A occurs when a homeowner sells their property

The seller must provide a signed Gift of Equity Letter containing: The exact dollar amount of the gift. A statement that no repayment is expected or required. Advantages and Disadvantages How Does the Gift of

The donor’s contact information and their relationship to the buyer.

Most lenders, including Fannie Mae and the FHA, restrict these transactions to family members related by blood, marriage, adoption, or legal guardianship, as well as domestic partners and fiancés.