The Secret of the Gift of Equity Purchase!

Summary

In this informative video, Jeff Travarthan, 'The Mortgage Pro,' explains the concept of a 'gift of equity purchase.' It involves selling a property to a family member at a price below market value, determined by appraisal. The seller can gift the difference in equity as a down payment, helping the buyer secure a mortgage with favorable terms. This strategy is applicable for various loan types and requires a documented gift letter and the buyer's mortgage qualification. Jeff also touches on potential tax implications and the option to use equity for closing costs, offering to assist viewers with such transactions.

Takeaways

• 🏠 A gift of equity purchase is a sale of a residence to a family member at or below market price, determined by a professional appraisal.
• 💰 The seller can sell the property for less than its market value, offering a discount to the family member.
• 👨‍👧 The buyer can use the gift of equity as a down payment, which is considered part of their mortgage qualification.
• 📝 The transaction must be documented with a gift letter signed by both parties, ensuring the buyer qualifies for the mortgage.
• 💼 This type of purchase can work with various loan types, including conventional, government, and some jumbo loans.
• 💡 The equity gift can also be used for closing costs, which can be rolled into the loan amount, maintaining the correct loan-to-value ratio.
• 🤝 The process may not require a real estate agent, potentially saving on realtor commissions.
• 📑 A contract for the sale can be simple and does not necessarily need to be complex, possibly using a standard form.
• 🤔 There is a potential for triggering a gift tax, so it's important to consult with a CPA to understand the tax implications.
• 🔍 The speaker, Jeff Travarthan, offers to help with gift of equity purchases and encourages viewers to schedule a chat for assistance.
• 📈 The concept is particularly beneficial in a rising property market, helping family members secure property at a more affordable price.

Q & A

What is a gift of equity purchase?

A gift of equity purchase is a sale of a residence to a family member or close relative, usually at or below market price, as determined by a professional appraisal.

Why would someone sell a property at below market price?

Selling at below market price allows the seller to assist a family member in purchasing the property, potentially making it more affordable for them.

What is the role of a professional appraisal in a gift of equity purchase?

A professional appraisal determines the market value of the property, ensuring that the sale price is fair and justified.

Can the gift of equity be used for anything other than the down payment?

Yes, the equity can also be used for closing costs, as long as the correct loan-to-value ratio is maintained.

How does the gift of equity help the buyer in terms of mortgage qualification?

The gift of equity can be considered as a down payment, reducing the amount the buyer needs to secure a mortgage.

What types of loans can be used for a gift of equity purchase?

Conventional loans, government loans, and some jumbo products can be used for a gift of equity purchase.

What documentation is required for a gift of equity purchase?

A gift letter signed by both parties is required to document the transaction.

Does the buyer need to qualify for the mortgage in a gift of equity purchase?

Yes, the buyer must qualify for the mortgage just as they would for any other property purchase.

Can a real estate agent be involved in a gift of equity purchase?

While it is possible, often the process is handled without a real estate agent to save on commission costs.

What is the potential tax implication for the person giving the gift of equity?

There may be a gift tax implication, and it's recommended to consult with a CPA to understand the tax consequences.

How can someone get assistance with a gift of equity purchase?

One can reach out to a mortgage professional like Jeff Travarthan for guidance and support in the process.