Gift of Equity Purchase: How to Sell Your Home to a Relative with No Money Down

Downpayment Equity

If you’re considering selling your home to a relative and want to sell it to them at a discount but not give it to them, a gift of equity purchase might be a good option for you.

What is a Gift of Equity?

A gift of equity is a real estate purchase and sale transaction, usually between relatives. It typically involves a parent wanting to gift part of the real estate or “equity” but not all of the property to a child. It’s a great way to buy a home from a relative with no money down.

Here are some benefits of this type of transaction:

Buyers can often get financing with no money down. By using the gift as a down payment and wording the contract correctly, buyers can usually finance the purchase with $0 down.
You can avoid unnecessary transaction fees. By selling the family home to a child or other relative, you can avoid transactional fees associated with finding a house from an unknown party.
You may be able to avoid mortgage insurance. Mortgage insurance (MI) is a premium paid to the lender or insurance company for financing greater than 80% of the purchase price. If the gift of equity is greater than 20%, you can likely avoid paying mortgage insurance.

To accomplish a gift of equity purchase, both the buyer and seller will need to do the following:

Find a lender, like Homestead, that has experience with these types of transactions. A good lender should be able to assist with drawing up the contract to maximize savings, choosing a title company, and managing both sides of the real estate transaction.
Discuss potential tax implications with a tax advisor.
The buyer should fill out an application with the lender to ensure they can qualify for the mortgage.

In conclusion, a gift of equity purchase is a great way to pass wealth from generation to generation when performed by the right lender. Contact our team to learn more.

To learn more, please reach out:

Recent Posts

Looking to Buy a Home in Texas? Here’s How You Can Save on Your Down Payment! September 10, 2024
How to Build Credit with Secured Credit Cards September 4, 2024

"By being open and recognizing our strengths and weaknesses, we can see opportunities for growth and ways to help each other."

- CEO, Jayson Hardie on Growth

Overland Park, KS

Endeavor Capital, LLC dba Homestead Financial Mortgage, Endeavor Capital Mortgage
MB.0006030. NMLS ID 222524 – Illinois Residential Mortgage Licensee.
Illinois Department of Financial and Professional Regulation (IDFPR)
Division of Banking – 100 West Randolph Street, 9th Floor. Chicago, Illinois 60601
All Inquiries: 1-888-473-4858
TTY: 1-866-325-4949

CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A COMPANY OR A RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.

THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT-OF-POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.