Gift of Equity

If you are thinking of purchasing a home from a family member or a relative, a gift of equity can help you with the down payment.

The lender will normally require a signed letter with the transaction details included on it.

Within the signed letter, or purchase contract, the seller may agree to pay for the buyer's closing costs, resulting in little or zero out-of-pocket expenses for the buyer.

In this transaction, the sales price is typically the appraised value of the home. The lender funds part of that sales price (usually what is owed on the property), and the remainder is considered a "gift" from the seller to the buyer.