Gift of Equity in Florida: Buying a Family Home Below Market With No Cash Down
A gift of equity Florida family sales use treats the difference between appraised value and a lower price as the buyer's down payment. Allowed from relatives on conventional, FHA and VA. The appraisal, the letter and the tax rules decide it.
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A gift of equity Florida family sales use treats the difference between the home's appraised value and a lower agreed price as the buyer's down payment.
Allowed from relatives on conventional, FHA and VA loans. The appraisal, the gift letter and the gift tax rules decide it. Our guide to buying from a family member in Florida covers the transaction.
How it works
The appraisal sets value; the contract sets a lower price.
The gap is documented as a gift from seller to buyer and applied as the down payment.
The Fannie Mae gift of equity guidance sets the rules.
The buyer brings little or no cash.
The seller receives the price, not the value.
Who can give it
Family members: parents, grandparents, siblings, children, and in-laws under most programmes.
Conventional and FHA allow it from relatives.
See our guide to FHA qualifications in Florida.
VA allows it under its gift rules.
Landlords and employers cannot give equity on most programmes.
The appraisal
The lender orders it; the appraiser is told the relationship.
See our guide to non-arm's length transactions in Florida.
Value must support the gift.
A low appraisal shrinks the gift.
See our guide to low appraisals in Florida.
The gift letter
The seller states the amount, the relationship, and that no repayment is expected.
See our guide to gift funds in Florida.
Signed by both.
The closing disclosure shows the gift as a credit.
No funds move; the paperwork carries it.
How much
Enough to reach the programme's minimum down payment, or more.
Twenty percent avoids PMI on conventional.
See our guide to removing PMI in Florida.
The seller can gift any share of the equity.
A larger gift is a larger tax filing.
Gift tax
A gift above the annual exclusion requires the seller to file a gift tax return.
The IRS gift tax page explains the exclusion and the lifetime exemption.
Tax is rarely owed; the filing is.
Two parents to a married couple multiplies the exclusion.
A tax adviser handles it.
Capital gains for the seller
The seller's gain is computed on the price received, not the value.
See our guide to capital gains on a primary residence in Florida.
The primary residence exclusion may apply.
The buyer's basis is the price paid plus the gift in some readings; a tax adviser confirms.
Get it right at closing.
Doc stamps
Florida deed stamps are on the consideration paid, the price.
See our guide to Florida doc stamps and intangible tax.
A gift of equity is not consideration.
The note and mortgage stamps are on the loan.
The title company calculates.
Occupancy
The buyer must occupy on primary-residence programmes.
A seller staying in the home is a flag on FHA.
See our guide to buying a home for a parent in Florida.
State the plan honestly.
A parent moving out and a child moving in is the classic case.
Existing mortgage on the home
The seller's loan is paid from the price.
See our guide to mortgage payoff letters in Florida.
The price must cover the payoff.
A gift larger than the seller's equity is impossible.
Run the payoff first.
Property taxes
A sale between relatives still resets the assessment to market.
See our guide to property tax estimates for new buyers in Florida.
The buyer files homestead.
Some transfers structured as gifts rather than sales avoid the reset; ask the property appraiser.
The choice has tax consequences both ways.
Homestead and the seller
The seller's homestead ends; the buyer's begins.
See our guide to the Florida homestead exemption.
Portability for the seller if they buy again.
See our guide to homestead portability in Florida.
The cap does not transfer to the buyer.
Combining with other help
A gift of equity plus seller-paid closing costs, within limits.
See our guide to seller concessions in Florida.
Plus down payment assistance where income allows.
The buyer can close with almost no cash.
Reserves still matter.
Investment properties
Gifts of equity are for primary residences and, on conventional, second homes.
See our guide to investment property mortgage rates in Florida.
Not for a rental purchase from a relative.
A below-market price on a rental is simply a good price with a larger loan.
Different rules.
Estate planning angle
Parents transferring a home during life with a gift of equity versus leaving it at death with a stepped-up basis.
See our guide to lady bird deeds and mortgages in Florida.
The step-up can save the child more tax than the gift.
An attorney and a CPA compare.
The sale is not always the best structure.
A worked sale
Parents sell to a daughter at a price below the appraised value.
The gap is a gift of equity covering twenty percent down; no PMI.
The parents file a gift tax return; no tax owed.
The daughter files homestead; the assessment resets.
The parents port their cap to a smaller home.
Siblings and shared inheritance
One sibling buying out others after a parent's death can use gifts of equity from each sibling seller.
Each gift documented separately.
The estate's authority to sell comes first.
The appraisal sets the value the gifts are measured against.
An attorney and a lender coordinate.
Where to start
Get an appraisal-supported value and the seller's payoff figure.
Set the price and the gift amount with a tax adviser on both sides.
Then get a pre-approval with the gift of equity documented as the down payment.