Equity Gift

Gift of Equity

FHA World - Gift of Equity

Equity Gift - A Gift of Equity Mortgage allows you to use the difference between the market value (sales price) and the amount you are actually paying for the property as the down payment.  This is called a Gift of Equity Mortgage.

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 gift of equity. Most lenders allow the gift to count as a down payment on the home.

A gift of equity requires a gift of equity letter that is signed by both the seller and the buyer. Within the signed letter the seller may agree to pay for the buyer's closing costs, resulting in little or zero out-of-pocket expenses for the buyer.

For the purpose of obtaining a mortgage a gift of equity is treated as a purchase transaction. A sales contract will be needed.