Can I buy a home with a gift of equity?
Answered by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
Yes. A gift of equity happens when a family member sells you their home below market value, and the difference counts as your down payment. It's common in family sales.
If a relative sells you a $400,000 home for $360,000, the $40,000 in equity serves as a 10% down payment. You'll need a gift-of-equity letter and an appraisal confirming value. We'll structure the transaction so it qualifies.
How a gift of equity works
Yes. A gift of equity happens when a family member sells you their home for less than it is worth. The difference between the market value and your lower purchase price becomes your down payment. No cash changes hands for that part.
Say a relative's home appraises at $300,000 and they sell it to you for $250,000. That $50,000 gap counts as a gift of equity, which is more than 15% down on the deal.
What you need to close
The seller signs a gift of equity letter, and the settlement statement spells out the discount. Lenders accept this on FHA and conventional loans when the sale is between close family members.
This route can wipe out your cash-to-close hurdle. Talk to us early so we can structure the appraisal and paperwork right, and apply once your family member is ready to sell.