Rates Improve; ?Gift of Equity? - CA Mortgage, CA Home Loan, CA ...

30 Year Fixed Rate Loan at a Cost of One Point: 3.375%* (APR = 3.599%*)

Rates improved a bit today again upon minimal economic news.

We often have buyers purchasing properties from close family members. These buyers often have minimal cash for a down payment, and the sellers (often parents) are willing to help the buyers out.

In these situations, the best option for a down payment is a ?gift of equity?. As long as the down payment is 20% or more, or as long as the loan-to-value is 80% or less, the entire down payment can be a gift of equity. No funds at all need to come from the buyer for the down payment.

The sellers simply have to attest the gift.

Often times we simply back into a purchase price by figuring out the desired loan amount, and then figuring out the purchase price simply by dividing the loan amount by 80% (to keep the loan-to-value ratio at 80% or less).

If the ?gift of equity? is less than 20% of the purchase price, the buyers will have to come in with at least 5% of their own funds.

As an aside, there is one more benefit from kids buying from parents: the kids can usually ?assume? the parents? property tax basis by filling out a special form with their county assessor.

*The above rate quote has the following assumptions: $500,000 purchase; $400,000 loan amount; 20% down payment; credit score above 740; property is SFR; borrower has sufficient income to qualify; Estimated closing costs affecting the APR include $4,000 for Origination Fee; $995 for Lender Fees; $2,300 for Title Insurance (CLTA and ALTA), $800 for Escrow Fee; and $1,000 for Prepaid Interest.
Call Jay Voorhees or Heejin Kim at (925) 855-4491

Real Estate Broker, CA Dept of Real Estate, DRE# 01524255, NMLS# 335646

Source: http://www.jvmlending.com/rates-improve-gift-of-equity-for-a-down-payment-no-cash-required

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