FHA World - FHA Gift of Equity
A Gift of Equity is a transfer of ownership of a property to a family member or someone with whom the seller has had a previous relationship, at a price below or at the current market value. The difference between the actual sales price and what is owed on the home is called the GOE. Most lenders allow the gift to count as a down payment on the home.
A G.O.E. requires a letter that is signed by both the seller and the buyer. For the purpose of obtaining a mortgage a G.O.E. is treated as a purchase transaction.
A sales contract will be needed.
Getting an FHA loan has never been easier:
First, you need to get pre-approved. This is an easy step and does not cost you anything.
Also, this step is very important -- as many people search out homes on their own just to find out that the house they found is not in the price range that they qualify for. This approach turns
into disappointment and lost time. Most realtors will only work with people who have been pre-approved.
Down Payment - FHA mortgage requirements for a home purchase have a minimum down payment of 3.5% of the sale price. The down payment must be sourced and seasoned and must come from the borrower or the donor of gifted funds or gift equity.
According to the new FHA Policy changes, which go into effect in early summer of 2010, FHA will require 10% down payment for anyone purchasing with a FICO score lower than 580.
Gift Funds - Down payment funds can be gifted from a relative, spouse, or a domestic partner. The gifted funds must be sourced and seasoned and cannot be borrowed by the donor.
Seller Concessions - FHA mortgage requirements allow for seller concessions of up to 6% of the sales price.
The new FHA Policy changes limit seller concessions to 3% of the sale price. These went into effect in early summer of 2011.
Reserves - FHA does not have any financial reserve requirements on single family homes and duplexes. Three months of reserves are required on 3 to 4 unit family homes.
What documentation will I need?
Today’s historically low interest rates make now the perfect time to purchase a new home.
FHA loan requirements new borrowers with less than a 580 credit score will be required to put down at least 10%
FHA requires a minimum credit score of 500 to buy a home or refinance
Chapter 7 Bankruptcy at least two years must have elapsed since the discharge date
Foreclosure must have been resolved for at least 3 years
Government loan: Seasoning is determined by the date the claim was paid
Loans other than Government: Seasoning is determined by the date of sale the lender sold the property
FHA guidelines requires three year past from the date of sale of the property