Unlocking the Potential of Gifts of Equity: Buying Mama's House

Gifts of Equity (aka buying Mama's house)

So let's say that your parents want to sell you their house, but they don't want full market value.

Picture this: Their $500,000 house is offered to you at a remarkably reduced price of $300,000

Woohoo!!!

One option is to write up a purchase agreement for $300,000. The problem is you would need $60,000 for a 20% down payment, to avoid mortgage insurance.

The better way to structure this is to write up the purchase agreement for $500,000 instead and then have your parents GIFT you the $200,000 in equity during the loan.

What this does is gives you the down payment , pays for closing costs , and you could even buydown the interest rate if you choose (which is awesome in this interest rate environment)!

Erica Roberts