Gift of equity home purchase from Father to Son…. options?
Wednesday, 1. September 2010
Hello.
I am seeking clarification of my options in a gift of equity home purchase situation. I realize I need to discuss these details with my CPA, but I’m looking for some more detailed information from the real-estate point of view.
- My father’s home is worth 9,000.
- He wanted to "gift" me 4,000
- Is there anyway I can buy the home without losing any equity? Is there a difference if sells me the home for 5,000 or if he sells it to me for 9,000 (and I use the 4,000 gift as a down payment)? I beleive my loan officer told me that there is a difference, but either way, I’d be borrowing 5,000.
Can anybody please clear up this situation? I heard that one option would require no money down on my part, where the other would require 5% cash (which is no problem).
Any information is appriciated.
If you could, please also answer this:
- Is there a way I can maintain the difference in equity on the home (4,000)? My accountant says there is a way… but I’m confused by the whole situation right now.
- Am I correct in assuming:
Purchase price: 9,000
Earnest Money deposit: 4,000 (gift amnt)
Total Amount finance: 5,000
Total:
earnest + amount financed + loan assumption + cash balance at closing
jamsoftheweek Says:
if he gifts the equity, then you can refinance the home with a loan in your name which may save you on closing costs (not sure) – id suggest this over him ‘selling’ you the home for 115k.
either way, you probably wont have to put any money down (the 5% cash), because taking a 115k loan out to buy a home thats worth 289k would be well below the standard 80% LTV ratio, and the 174k down payment in the other scenario would take care of that as well.