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gifting a houseIf you’re lucky, you’re given a great many gifts in your life. Sometimes these gifts are material things like a Buzz Lightyear action figure or an Easy Bake Oven that was used exactly once before both you and your parents realized it was just easier to bake an actual cake in a real oven.

Sometimes you’re given the gift of knowledge. I’ve had at least five excellent teachers and mentors that had an enormous influence on my writing and what I’m doing today.

The gift can even be a good friend who has seen you both laugh and cry – someone who’s always there.

You may think of all these things as great gifts you’ve obtained over the course of your life, but did you know the down payment on your house can be a gift? It’s true.

In this post, we’ll go over how you can use gift funds to help fund your down payment or other mortgage-related costs.

Who Can Give a Gift?

Before we go over the different types of gifts and what they’re used for, we first need to discuss where the gift can come from. For Fannie Mae, Freddie Mac, jumbo and VA mortgages, the gift must come from a member of your immediate family (including your spouse, domestic partner or fiancé) or close extended family (grandparents, aunts or uncles).

With an FHA mortgage, the gift can come from any of those sources or the following:

  • A close friend who wants to see you do well
  • An employer
  • A labor union
  • A government agency
  • A public entity such as a nonprofit that provides homeownership to families of low to moderate income first-time home buyers

You can use this search engine to find nonprofits that provide FHA assistance in your area.

Gift Requirements

There are two types of gifts that your relatives or contacts can provide: a cash down payment gift or, in the event a family member is selling the property to you, a gift of equity. In each case, the funds may be used for the down payment, closing costs and prepaid interest points. Depending on the type of loan, you may also be able to use the gift in order to pay off debts so you can qualify for your mortgage. In certain situations, a client has to have a certain amount of payment coming from their own funds:

  • A 5% contribution is required on certain conventional loans if the down payment is less than 20%.
  • There’s a required 5% client contribution on all jumbo loans.
  • If your credit score is between 580 and 619, 3.5% of your FHA down payment has to come from your personal funds.

Show Me the Money: Cash Down Payment Gifts

A cash down payment gift is pretty straightforward. You get money from one of the sources above and use it toward your down payment and costs. There are a couple of things your lender will need from you in order to use the gift:

  • A gift letter (including, among other things, the amount of the gift and a statement that it doesn’t have to be paid back)
  • Evidence of the transfer of funds

You can show evidence of the transfer with the donor’s withdrawal slip and your deposit slip, or a copy of the check and evidence that it’s been deposited into your account. If the gift is made at closing, there must be a copy of the donor’s certified check and a settlement statement with the exact amount of the gift.

For FHA loans coming from a family member or close friend, some additional documentation is required.

We need a copy of the canceled or certified check. We also have to be able to verify that the donor had the money for the check in the account for at least 30 days prior to the gift. This is verified through bank statements.

If the donor borrowed the funds, they need to be able to document the source. The gift cannot come from cash the donor has on hand.

The Family Discount: Gifts of Equity

A gift of equity occurs when someone (usually required to be a family member) sells you a property for below the sale price. The difference between the price you pay and the listed price is considered an amount of equity to be used toward your down payment or to help pay off debt to qualify. It can also be used toward your points and closing costs.

On FHA loans, a client can also get a gift of equity from a nonprofit agency or his or her in-laws.

Gifts of equity are not allowed on VA and jumbo loans.

In order to use the gift of equity, a client must include a gift letter, just as if they were being given a cash down payment. Minimum client contribution requirements still apply as well.

That’s the lowdown on down payment gifts. If you still have questions, let us know in the comments.

This Post Has 196 Comments

    1. Hi Christina:

      A gift of equity is intended to go toward down payments or it can be used to pay off debt before closing. However, for the purposes of qualifying for a monthly mortgage payment, your debt-to-income ratio is still calculated. I hope this helps and check out that resource. If you would like to get started, you can apply online or give us a call at (800) 442-4383. Thanks!

  1. I would like to ‘gift’ my daughter $25k for her to use as a down payment for a home. I will need to get a loan for this ( should be no problems because I have good credit). Can I get the loan classified as a Home Equity loan and get a lower interest rate or will it be considered a ‘regular ‘ loan?

    1. Hi Alec:

      We don’t do home equity lines of credit, but presuming you qualify, that’s one option. Another good thing to take a look at might be a cash-out refinance. The benefit here is that because it’s based on your primary mortgage, you can get a lower rate than you would on a HELOC, which is based on a secondary lien. If you would like, you can get started online or give us a call at (800) 442-4383. The only other thing you should know is that you will have to write a letter stating that the gift is actually a gift and not something you expect repayment for. Thanks for reaching out!

  2. I have a HELOC loan on my current home. My best friend is wanting to buy a home and needs $6000 more for her down payment. Am I able to take money from my HELOC loan and gift it to her for the down payment of her new home? Why or why not? If so, what is the best way to ‘trace’ this gift for her lending process?

    Thank you!!!

    1. Hi Sara:

      This is absolutely something you can do. It’s just a gift and then you would pay it back over time as part of your HELOC. Not all gift funds are required to be sourced, so it’s going to depend on the type of mortgage she’s getting as well as the requirements of the lender. So I would advise your friend to talk to her lender and find out exactly what they need in her specific case. You also have to write a letter, stating, among other things, that you don’t intend for her to pay it back. I hope this helps!

  3. As a seller are we able to give our son gift equity and have some of money in our pockets. For example, balance due on home is 100,000.00, gifting them 20%, house is appraised at 200,000.00, we would like to have $10,000.00 as a cash payment due to us at time of closing, is this possible?

    1. Hi Cathy:

      That’s not really how it works, but I think I can clear up some confusion here.

      If the house is worth $200,000, a 20% gift of equity would be $40,000. Backing that out, that leaves you with a $160,000 sale price. After paying off the mortgage, you would end up with a check for $60,000, minus any closing costs you end up paying associated with the transaction. I hope this helps!

  4. My daughter received a gift of equity on a house she was purchasing with her fiance. The gift of equity was gifted to both of them. My daughter holds the entire mortgage and the deed is in her name. She and her fiance broke up and now they want her to pay them 1/2 of the amount of the gift. Is she obligated to return the gift of equity in money?

    1. Hi Jo:

      It’s a gift, and they can’t legally have her pay it back. It’s also against mortgage regulations. Thanks!

  5. I’m not sure if this is the right section for my question: I am engaged and my fiance already owns a house. We are appraising the value of the house and the balance left on the mortgage, and I will pay him half of the equity (will call this a monetary value of “A” so that I will own 50% of the equity of the house (my name will be transferred onto the title). If we do this after we are married – I give him a financial gift of “A” and declare that I intend him to be the sole recipient of this gift (i.e. it will not be a marital asset), and he puts me on the title of the house – how do I report my gift to him with regard to taxes? Will he need to pay taxes on my gift to him? Thank you.

    1. To the extent that the gift would be taxable, the giver pays the taxes, not the recipient. You have to report back gifts over $15,000. However, it just counts toward your lifetime gift and estate tax limit. You can talk to a tax professional about this, but unless you make lifetime gifts upwards of several million dollars, there are no tax implications, at least at this time. I hope this helps.

      1. Thank you for your reply. I think I understand what you are saying. One other question: the way I see it, my future spouse and I will be transferring funds to each other. Right now he has 100% equity in the house and that it his equity. I have 100% equity in my savings. Upon marriage, he will transfer 50% of the equity of the house to me and I will transfer X amount of my savings to him in order to obtain that 50% of the equity of the house. My question is: is my transferring X amount of my savings considered a marital gift? Or is this considered a transaction in which he is selling me 50% of the equity of the house, and I need to report the transfer of “X” in a different way and not as a gift? Thanks for any advice you may have.

        1. Hi Rene:

          That’s a good question. Unfortunately, I think it’s also beyond what I can comfortably answer for you. In terms of questions of the tax treatment, I think it would be best for you to speak with a tax preparer and/or financial advisor. I hope this helps!

    1. Hi Jasmine:

      I’m sorry for missing this comment. That’s a very good question and I want to make sure you get the right information. I recommend speaking with one of our Home Loan Experts at (888) 980-6716.

  6. Let’s say I’m buying my house from my parents and it is appraised at $400,000. They are willing to give me a $50,000 gift of equity and sell to me at a final cost of $350,000. My questions are this:
    – would the sales agreement reflect a sale price of $400,000 or $350,000? This purchase would be financed through a lender.
    – would the “reported” sales price that is included on public records reflect a sales price of $350,000 or $400,000?
    – Would the gift of equity ($50,000) count towards my down payment on the house?

    1. Hi Stan:

      The sales price and reported sales price would both be $350,000, but that has no bearing on the actual appraised value of the property in the future. It’s worth whatever the fair market value is at the time. The gift of equity counts toward your down payment. If you’re looking for a lender, we would love to help! You can apply here or give us a call at (888) 980-6716.

  7. Hello –
    We sold our home in October 2020 to our son and his wife. We signed a Quicken Loan (Providing A Gift of Equity to Fund a Loan) gift letter gifting $60K (100%) as the fair market value was estimated at $300K. We did not receive any cash. Our goal was to pay the remaining balance of our loan. No monies were actually exchanged as no-one received a check. How is it that I have to pay taxes on something I did not receive?

  8. I am purchasing a home from my uncle at a predetermined price of 485k this is well below the appraised value of 550k. Can he gift me 30k and still receive his 485k that was agreed upon? Where does the money come from? Will the purchase price have to be raised? therefore raising the loan amount? and monthly payment?

    1. Hi Jake:

      The way I would describe this is that the discount on the purchase price below market value is considered a gift in itself. If nothing changed about your current agreement, he would be gifting you $65,000 to go toward your down payment and closing costs. If he wants to gift you with $30,000, the purchase price could either go up a bit so that the discount would be less or it could go down to $455,000. Assuming he wants to get $485,000 out of it, it may be better for you if you just leave things the way they are and not worry about the $30,000. You can get started online or give us a call at (888) 980-6716.

  9. Hi! Hoping this gets answered.

    My husband and I would like to use gift of equity to purchase my parents home. They owe $322k but the house appraises for $460k. They would ask us to pay what they owe then gift us 10% down payment. Does this mean we are essentially taking out a loan on $289,800? So my parents will have their mtg paid off and the gift would lower our mortgage? Please help!

    1. Hi Melyssa:

      It depends on what your parents mean by “pay what they owe.” If you were to pay what they owe, your mortgage would be $322,000. You wouldn’t need to come up with a down payment because the discount on the home vs. what they could get on the open market counts as the down payment. On the other hand, you have even more equity when you buy the house if they get you an additional money and bring it down to $289,800. It’s the difference between 30% equity and 37% equity in the scenario you’ve laid out. Generally, the higher your down payment, the lower your rate, if everything else is held equal. I hope this helps!

      If you’re ready to get started, you can apply online or give us a call at (888) 980-6716.

  10. We are trying to buy a second house from my mom. We settled on the purchase price of $135,000, though she believes it to be worth closer to $170,000. She can gift up to $28,000 of equity without tax implications. However, the bank is saying that if she gifts us that much on the purchase price of $135,000, she would only receive $107,000. The bank said that in order for my mom to receive the $135,000 and gift us the equity., we would have to increase the purchase price to $168,750. I don’t understand this, could you please explain? Thank you.

    1. Hey Allyson,

      Here’s how I read your comment: If your mother gifts you the equity, that is money taken out of the purchase price. So if she gifts you $28,000 of a purchase of $135,000, she only will receives $107,000 ($135,000 – $28,000 = $107,000). It sounds like the bank is saying that, in order for your mother to receive $135,000 and for you to get the full gift of equity, the purchase price needs to be raised to $168,750.

      There are laws and taxes that vary state-to-state depending on the specifics of your situation. I don’t want to give you any wrong information. If you have any questions, I recommend speaking with one of our Home Loan Experts at (888) 980-6716 to go over your options. They will be able to fully walk you through the math of the situation, as well as address any of your concerns.

      Thank you for your comment and I hope this helps!

  11. Hi,
    So my mom is selling me her house for 85,000 which is lower than the market price, I am still a bit confused about what gifting equity would actually do for me. I am deciding if this is something I can afford to do or not. I would still need a loan, would I have to take a loan out for 100,000 to make sure I can get repairs done, or just the 85,000 with the gift of equity?

    1. Hey Karlee,

      Thank you for your comment. If you need to take out more for home repairs, you may have a couple different loan options. I recommend giving us a call at (800) 251-9080. This will get you in touch with a Home Loan Expert who can go over the details of your situation and give you the most correct answer.

      I hope this helps. Once again, thank you!

  12. Hello,
    Can buyer obtain conventional loan under these circumstances:
    • Purchase of a 3-family property. (500k purchase/ 20% down payment).
    • Buyer (Naty) to occupy one of the apts.
    • Seller is a 2-member LLC.
    • One of the members is Naty’s fiance & he wants to gift her the 20% down payment from his equity.
    • There will also be a seller concession.

    – R Rosario

    1. Hi Ranfi:

      This one is a bit complicated, and I don’t want to give you the wrong advice. Please feel free to speak with one of our Home Loan Experts at (888) 980-6716 about the particulars of the situation.

  13. We are purchasing a second home through a TRUST that my husbands grandmother set up. Can the TRUST (aunts/uncles/father) give a Gift Of Equity? House is appraised at $275,000; sale price $240,000; Gift of equity $27,000 to make the total sale price $267,000. Would there be tax implications for the family and/or for us?

    1. Hello Sioux,

      There are laws and taxes that vary state-to-state depending on the specifics of your situation. So I don’t give you any wrong information, I recommend speaking with one of our Home Loan Experts at (888) 980-6716 to go over your options.

  14. sold my rental house to my daughter. I have not lived in it for 5 years. I gave her the 35k equity as down payment. will i be responsible for any gift tax?

    1. Hi Kristina:

      It depends on how you plan to occupy the property, but for a 1-unit primary home, there’s no minimum client contribution. The entire down payment can come from the gift. If you would Like to look into your options online, you can do so through Rocket Mortgage. You can also speak with one of our Home Loan Experts at (888) 980-6716.

  15. I am selling my home to my son for 180k, it was appraised at 200k. My walk out money is 160k. I feel like I got the raw end of the deal. We assisted him with the closing and down payment.

  16. I hope you all can help me, before I make a mistake or lose out on something.

    right now I am going to purchase a home from a family member. valued at 300k. Purchase price 185,000

    What is the max gift of equity to be used as a downpayment – .. could i use the full 115 k and only have to have a loan of 70k? to make the purchase. .. with family member getting 185 k.. the purchase price. I hope this finds someone soon. Thank you in advance

    1. Hi John:

      I think there’s a little misunderstanding of the way a gift of equity works, but I’m happy to clear that up. The difference between the $185,000 and the $300,000 that the home is valued at is the gift of equity. That’s what counts as your down payment. So your loan amount in that case would be $185,000. The only way to have a $70,000 loan would be if you brought another $115,000 as your down payment contribution. So the loan amount is actually a little bit higher than what you’re thinking. However, that still brings you into the transaction with a ton of equity and will help with your interest rate. If you would like to go over your options, you can get started online with Rocket Mortgage or give one of our Home Loan Experts a call at (888) 980-6716.

  17. Hi,
    #1 – Is there an amount limit on a gift of equity parents can gift to a son if he wishes to apply for a FHA loan for the first time? I wish to buy a property from my parents which is all paid-for (no mortgage or debts on it) . The property is not their principal residence. Property was appraised for $275,000 and they are considering a gift of equity in the amount of $75,000.
    #2 – I have a brother. Would it be necessary for him to agree with this gift in writing as the proceeds from the sale of my parents’ property may be considered as an expectation of his future inheritance?

    1. Hi M.:

      I’m going to take these in order.

      1. There are no limits on a gift of equity for an FHA loan.
      2. Your brother’s inheritance has nothing to do with your mortgage transaction, so no.

      If you would like to look into your mortgage options, you can do so online with Rocket Mortgage. You can also speak with one of our Home Loan Experts at (888) 980-6716. I hope this helps!

  18. The article mentions using a gift of equity to pay off debt. I’ve been told that I have too much student loans and credit card debt to qualify given my income. My parents would be willing to sell me one of their properties for very little if I could qualify for a mortgage.

    How would I use the gift of equity to pay off debt to qualify? Thanks ~ Ty

    1. Hi Ty:

      You can let your lender know the amount of the proposed gift and they would be able to do the calculations to see what would happen if you were to pay down your debt. In your case, I recommend speaking with one of our Home Loan Experts at (888) 980-6716 to go over the specifics of your situation.

  19. HELLO.
    My parents are considering selling us their house. The house is paid off, no mortgage or loan of any type. I do believe they are behind on taxes, though.
    So, let’s assume the house is worth $450,000. Since it needs work and they have alternate housing (aka, won’t need to buy something else) they have mentioned accepting $200,000 from us.
    That would be a gift of $250,000 in equity. Obviously that’s more than a down payment’s sum because it’s more than the price of the sale. Could we use some portion of the equity towards the down payment and then use the rest towards necessary/costly renovations? Also, the taxes owed, can it be applied to that cost?


    1. Hi AC:

      Typically, any back taxes would be paid by the seller, your parents, out of the $200,000 you’re going to give them. You should talk to one of our Home Loan Experts about your options for purchasing and doing renovations at the same time. You can fill out some basic information online or contact them at your own convenience by calling (888) 980-6716. Thanks!

      1. Ok thanks.
        But for the time being could you answer at least part of the question–with the sum of gifted equity being larger than the price of the sale, how does this work being that it more than suffices for the down payment?

      2. Hi AC:

        You can’t use the gift of equity itself toward anything other than the down payment and closing cost. However, the fact that you would have more equity in the home when you get your renovation loan makes the loan smaller and the overall cost of the loan should be much lower. I hope this helps!

  20. Hello,
    What is the constraint on how low you set the “sales price”? It seems that the lower you set the sales price, the farther the potential gift of equity goes, and thus the less you have to put down.
    For example, say my grandfather can only give me $15k of equity for tax reasons. If you set the sale price of the home at 200k, then you can use the $15k gift of equity as part of the down payment, and then pay $25k out of your own funds to get to 20% equity to avoid PMI. But if you change the sale price to $150k, you only need to come out of pocket with $15k to get to 20%.
    It can’t be as simple as simply “declaring” on a form that the sale price is $150k even if the FMV is higher, right? Would the IRS potentially audit something like this and make the donor declare the actual size of the gift?

    1. Hi Ken:

      I’m going to first let you know that we are not tax experts. That being said, property does have a fair market value and the difference between that value and the sales price agreed upon would be the gift. With that said, the lifetime gift and estate tax exclusion limit is $11.4 million for an individual and $22.8 million for a married couple filing jointly. In other words, while the gift may have to be reported to the IRS, it’s highly unlikely the donor would ever end up paying taxes on it either during their lifetime or out of their estate unless we were talking about a whole lot of money. I hope this helps!

  21. Grandma Passed away in April of this year 2019. The home has no mortgage owed. Father inherited the house thru the Estate and is selling to my wife and I , how much can he gift equity to us, Washington State, and the home value is estimated at $410,000.00 we agreed on a purchase amount of $360,000.00 , what possibly could be tax implications for gifting that much equit?

    1. Hi Eric:

      I’m sorry to hear about your grandma. You have my condolences.

      From a gift of equity standpoint, your father can gift you as much equity as he wants. The only consideration you might need to take into account is making sure that he gets enough out of the sale to pay off any existing mortgage or other liens on the home. In terms of tax implications, since the gift is above the IRS limits for reporting, it will have to be reported. The way this works is that there’s a lifetime limit to how much can be gifted or inherited through an estate before taxes are paid on it. That limit is currently $11.4 million, so the odds on coming anywhere near it are pretty low. If you have any specific tax questions, we recommend speaking with a tax adviser.

      If you would like to go over your options for a mortgage, we can help you get started online with Rocket Mortgage or you can give one of our Home Loan Experts a call at (888) 980-6716. Have a great day!

  22. Hello, I’m interested in buying my parents home and I’m wondering if they have to own it outright (as in paid off) to give a gift of equity. The home values for $400k and they owe $170k so they have alot of equity. I was told by someone that the gift of equity was only possible when the house is owned out right. Is this true?

    1. Hi Jacob:

      You’ve been given the wrong information. It’s totally possible for your parents to give you a gift of equity. The only thing is that they’ll want to make sure the selling price is at least enough to pay off the balance of the loan. If you would like to go over your options, you can do so online with Rocket Mortgage or give us a call at (888) 980-6716. Have a good day!

  23. Hi,
    My parents are selling me their home for 200k. It was appraised for 500k. They have already paid off the home. My lender said they can gift me the equity. What does that mean? What happens if they do not “gift” me the equity? What can they do with the equity themselves?

    1. Good morning, Sharon:

      If they gift you that equity, it means you’re getting part of the value they’ve already built up in the home to be used toward your down payment and closing costs. In this case, they’re gifting you 60% of the value of the home.

      If they don’t gift you the equity, there wouldn’t be a benefit to them because they’re still selling the house, but they’re doing so at well under market value. Typically, you would take out a mortgage or home equity line of credit in order to access the existing equity in the home and use it for repairs, remodeling or any number of other investments. However, since they are selling the house, they won’t be taking out another mortgage. Therefore, the only benefit would be to give you the gift of equity. This helps you because the higher your down payment is, the better your rate.

  24. Im looking to buy my parent’s property from them because they have recently suffered some health issues where it’s increasingly difficult for them to maintain the property physically and monetarily.

    Let’s say we agreed on the sales price of $600,000. They can then gift a gift of equity for 20% at $120,000. This would bring the balance of the sale to $480,000. Given the fact that my our loan amount is then $480,000 can I then pay an additinal 20% ($96,000) of the $480,000? Would that be considered as 20% down? Or would that be considered as just paying the interest and principal off my 20%? My goal is to lower my monthly mortgage as low as i can. Is this all feasible? And would would my monthly mortgage be in this case?

    1. Hi Crystal:

      I’m going to kind of deconstruct this backwards a little bit and start with the last question. It’s not possible for me to tell you what your monthly mortgage payment would be because it depends on your interest rate as well as what you choose for a mortgage term. That said, you can check out our rates page. I’m then going to give you our amortization calculator where you can put in a hypothetical interest rate and term and see what your monthly payment would be.

      Equity is calculated based on the initial sales price. Therefore, when your parents bring the sales price down to $480,000 because you’re a family member, that difference in the market sales price and the family discount actually functions as a 20% down payment for you. Since your down payment is calculated based on the initial sales price of $600,000, bringing an additional $96,000 to the table would make your total down payment 36%. This is all feasible.

      If you would like to get started, you can do so online with Rocket Mortgage® or give one of our Home Loan Experts a call at (888) 980-6716. Have a great day!

  25. Our house appraised for 500,000. We sold it to our kids for $398,00, seven thousand more than we paid for it. Now it is tax time. The title company has listed the purchase price of the house as 500,000. With 110.000 in gift funds. And we are being taxed on those funds. Is this correct? I think I need a tax attorney?

    1. Hi Karen:

      If you’re actually being taxed on the gift, I would talk to a tax attorney. What I think is happening is that you have to report that you made the gift to be counted against your lifetime limits of what can be excluded from gift tax. Basically, you have to report gifts over $15,000, but bigger gifts are just counted against your lifetime estate tax limits which for joint filers is $11.18 million. Basically, unless you’re making huge gifts, you shouldn’t be taxed. You can find more information here.

  26. Hello,

    I’m debating if the gift of equity will be worthwhile in my position. I’m purchasing a condo for 115k from family, and for discussion’s sake, we could assume the fair value is 10k more (125k).

    If I already have 20% down in my own money, is it worthwhile for me to use the gift of equity since it will essentially raise my overall mortgage?

    1. Hi Bob:

      It shouldn’t raise your overall mortgage. The difference between what your family sells it to you for and what they can get from other buyers on the open market at the appraised price goes toward your down payment. If anything, it should lower your monthly mortgage payment because you have a smaller loan to pay off. If you would like to go over your options online, you can get started with Rocket Mortgage. You can also feel free to give one of our Home Loan Experts a call at (888) 980-6716.

  27. My fiance and I just got engaged. She is buying the house I live in from my brother and I am wondering if she qualifies for a gift of equity from my brother to help the purchase process? She is buying this house without my name on the application.

    1. Hi Jim:

      Depending on the type of loan she gets, it’s possible that your brother can give her a gift of equity as her future in law. However, I highly recommend you have her speak with one of our Home Loan Experts at (888) 980-6716. They would be able to fully go over the options. Have a wonderful day!

  28. Can a gift of equity come from a Trust? All the members of the trust are relatives.
    Me and my wife are trying to buy her grandmas house wich is in a trust. Her mom and uncles agree on give us a gift of equity, but we were advise that it can not be from a trust. It that accurate?

    1. Hi Jorge:

      The property has to come out of the trust before we can help you with a mortgage on it. So the answer is yes. That said, there are ways we can help you through the process. I recommend speaking with one of our Home Loan Experts at (888) 980-6716 to go over your options.

  29. Hello,

    We are in the process of buying my Sister’s home from her. 250,000 is what is stated as the sales price. with our 3.5% down(Gifted by our parents), it takes the loan to 241250. House has not been appraised but local assessment shows 252000 and fair market shows 276000.
    Pending inspection and appraisal of course..
    1. Does the Gift of Equity bring down the amount financed?
    2. if so/not, how does this affect the financing of the mortgage?

    1. Hi Aaron:

      1. Yes.
      2. This gets to the heart of your question. If you can get your sister to sign a gift of equity for you, this would be included in your down payment which would effectively make your down payment larger. Assuming it comes in at the fair market value you’ve hypothesized, your total down payment would be about 9.42%. If the gift was slightly larger, your total down payment could be 10%. If you make a down payment of 10% or more, you would only pay FHA mortgage insurance premiums for 11 years as opposed to the life of the loan, so there’s theoretically a big incentive for you to come up with a slightly higher down payment. If you want, I would recommend you call one of our Home Loan Experts at (888) 980-6716 as they can go over your options in detail.

      1. Follow-up questions:

        1. Would my sister still be paid 250k for the home as originally agreed?
        2. My overall mortgage would be the 250k minus whatever down payment(Equity/ash Gifts)? (Excluding fees and closing)

        Thank you.

  30. My mother and her boyfriend bought a home a few years ago. Last summer my mother died, leaving her boyfriend as the surviving mortgage holder. He can not afford the home and wishes to sell it to me. He is offering to sell to me only for what he owes, which is approximately $87k. The home is valued at $100k. Can he gift me the equity and then apply that towards a down payment, closing costs, and points on an FHA loan? Thanks

    1. Hi Jim:

      Unfortunately, the FHA has fairly strict requirements that the gift of equity would have to come from a relative. Because your mother and her boyfriend were never married, he isn’t technically related to you. I would recommend you speak with one of our Home Loan Experts as they may be able to go over other possible loan options with you. They can be reached at (888) 980-6716. Thanks for reaching out!

  31. Hello and ty for your time my husband and I have two rental properties one is in my name one is in his name we would like to sell one to our daughter he purchased the house for 78 thousand and we would sell it for 55 thousand to her !} can we avoid capital loss by reinvesting in another ? 2} Do we put the money into investing in the other property Im pounding my head reading so much im over whelmed . This house is in my husbands name do we first move it to both of our name so we can both gift her ??? thank you for any response I appreciate you sincerely

    1. Hi Monica:

      In terms of the capital gains thing, you might be best off speaking with a tax adviser to determine the proper way to go about this. However, I can tell you that it doesn’t matter for the purposes of the mortgage whether one of you gifts the property to her or you both do. The only thing I can see that affecting is the yearly gift limit. You can gift your daughter up to $15,000 per year without it counting toward your lifetime estate gift limit. That limit is currently $11,180,000 per person, so a couple could gift up to double that amount. I would speak with a tax person, but I hope this helps.

  32. Hi question regarding the gift of equity. If purchase price is 204,730.00 but the relative selling only is going to get 174000. Because she’s gifting 30k to grandchild to use as down payment. Is this really only a paper transaction? And does the house have to appraise for the full 204k or more?

    1. Hi Lily:

      I’m going to take the easy one first. No physical money is changing hands, so in that sense, it’s a paper transaction.

      The appraisal can matter. For the purposes of mortgage insurance, with a conventional loan, if the down payment including the gift of equity is less than 20%, you could end up paying mortgage insurance for a while. Also, if it’s an FHA loan and she isn’t buying the relative’s primary residence, they have to have at least 15% down including the gift of equity. If it’s a primary residence, the minimum down payment on FHA this just 3.5%. This means that the appraisal has to come in so that the gift of equity ends up being sufficient to stand in for a large enough down payment to cover the 15%. If they don’t, they may need to bring money to the table. I hope this helps!

  33. I’m trying to buy my cousins house, the Loan officer said we could do a gift of equity, I was going over the paperwork to sign and in the section for gift of equity a cousin is not defined as a family member so we can no longer go this route, however the gift of equity is still built into mortgage… I need advice!!!

    1. Hi Jennifer:

      Lenders may have different policies depending on whether they are the ones ultimately backing the mortgage. If they aren’t the ones who will ultimately be insuring the mortgage after you close, it depends on the mortgage investor. If you’re getting a conventional loan backed by Fannie Mae or Freddie Mac, a cousin is allowed to give you the gift of equity. If it’s an FHA mortgage, your cousin can’t give you the gift. If the gift of equity is unworkable, you may have to restructure the transaction, but your lender should have caught that up front.

  34. My Husband and I have been signing a letter every year gifting my sister $28,000 as equity in the home we home we own, but let her live in. Now she would like to buy it. Can we use the last five years of gift letters as her down payment and she just pay us the remaining balance on the fair market value of the home? The home is worth $275,000, less the $84,000 gift of equity, and she pay us $135,000?

    1. Hi Lisa:

      If you’ve been giving it to her for the last five years, it should be in her account long enough that she can just use it as regular assets. It wouldn’t be a problem. If she has any questions, she can give one of our Home Loan Experts a call at (888) 980-6716.

  35. I would like to do a Gift of Equity to my stepdaughter and family but they have horrible non existent credit. Had a house foreclosed on them several years ago. Can I still do this?

    1. Hi Jan:

      Their credit has no impact on your ability to give them a gift of equity. However, the problem they’re going to run into is that you need decent credit (580 median FICO® or higher) to get approved for a loan in many cases. Any score below that is considered subprime. Not only would they be paying higher costs for the loan, but not many lenders do those.

      I would recommend they start monitoring their credit with a service like QLCredit. They can pull their VantageScore® 3.0 credit score and report from TransUnion. Because it’s a soft pull, it wouldn’t affect their score. In addition to getting the report and score for free every two weeks, they’ll get personalized tips on how to improve their scores.

      This blog post also has some good general credit building tips. Hope this helps!

  36. I have been renting my brothers house. It is worth $300,000 and he will sell it to me for $220,000. If the $80,000 is considered a gift of equity, will he have to pay taxes on that money?

    1. Hi Asant:

      I’m going to preface what I have to say with the fact that we are not tax experts. For the most definitive advice, you should really talk to a CPA or other tax professional. However, I’ll try to help here.

      Since the gift is greater than $15,000, he does have to file a gift tax return with the IRS. However, your brother can gift up to $5.6 million in his lifetime before yes to pay taxes on any of it. Forbes has more information. I hope this helps!

  37. I’m buying my grandparents house for $120,000, it was just appraised for $160,000. So I have $40k in equity, we are putting the price at $128,000 and using that $8000 for the closing costs. But when it comes to using the gift of equity, will that amount go on to the loan amount ? So 3.5% down is $4480, so will my loan then be for $132,480? Just want to make sure my family is still getting the full $120,000 at the end of the day.

    1. Hi Kyle:

      When you take a gift of equity, the gift can be used to cover both your down payment and closing costs. With that in mind, your loan amount would just be slightly higher because part of your gift of equity would be covering the closing costs. If you agreed on a purchase price of $120,000 with the gift, that’s the amount they would get at the end of the day. If you have any questions, I recommend speaking with one of our Home Loan Experts at (888) 980-6716. Thanks!

    1. Hi Rohn:

      When you get the gift, your family member has to sign a statement in which they identify their relationship to you. It works like a sworn legal statement.

  38. I’m selling my home to my son & daughter in law for 69,000 it’s worth 100,000. What happens to the 30,000 equity that I earned? Do i lose it?

    1. Hi Charmaine:

      Anytime you sell a home for less than what it’s worth, that extra equity is transferred to the buyer, in this case your son and daughter-in-law. I hope this helps!

  39. My husband and I are purchasing our first home. The loan will be in my husbands name since my credit score is low and will give us a higher interest rate. He makes enough and has a good enough score to qualify on his own, but we will both sign on the deed. Our problem is that we needed to pay off one of his credit cards before closing on the house. If I took out a line of credit to pay for his credit card, and not towards any of the closing cost or down payment, would that at all put us in any danger of the loan not being approved? Would I have to show documentation where the funds came from to paying off his credit card? Would they care that it came from a personal line of credit?

    1. Hi Joanne:

      I see that you’ve made contact with us. I’m going to have someone reach out to go over the best option for you in this situation because everyone is a little different. They’ll be in touch shortly.

  40. Kevin:
    What is the statute of limitations on having to do a gift letter.

    I have gifted funds to my daughter for years for her to pay off her student loans, in preparation for buying a house. I want to do a final gift now for a purchase at least a year out. Do I need to prepare a letter and other documentation if a year has passed?

    1. Hi Tony:

      If the funds have been in her account for a year, they likely wouldn’t need to be sourced. A lender might ask for a few months of bank statements, but not from that far away. Hope this helps!


  41. My fiance and I bought a house from my Grandmother. She gave me ( letter is only in my name) a gift of equity on it to help us hit our 20% down payment. My name is on the deed but not on the loan. We have actual separated and want to take my name off of the deed. Am I entitled to that Gift of Equity that was in my name only from my grandmother before I sign my name off?

    1. Hi Sarah:

      I would talk to an attorney to be sure. However, I believe because no money actually changed hands, it would just be considered equity in the home. Since you’re both on the deed, you both have 50% ownership in the house regardless of where the gift of equity came from. You would be entitled to that 50%.


  42. Was wondering if someone can answer. My wife is currently the only name on the deed of current home. We plan to use the proceeds from the sell of this home as a down payment on a new home. My wife credit prevents us from filing for the new home mortgage together. Is the money we are providing for the down payment considered a gift to me since I will be the only name on the new mortgage? If so, are there any drawbacks to it?

    1. Hi Anthony:

      If you both have access to the account in which the funds are being deposited, it isn’t considered a gift. Even if you don’t, you just have to have her fill out a gift letter. The only drawback to this is that gifts are taxed, but there’s a lifetime tax exclusion on the first $5.6 million in gifts or $11.2 million for couples. You can find more information here. Hope this helps!

  43. My daughter and son-in-law are buying a home with the proceeds of sale from their current home but will be short for a 20% down payment by approximately $10,000.00 . I want to gift $10,000.00 to my daughter by withdrawing funds from my IRA. Are there any catches to this other that the IRA withdrawal will now be considered taxable income for me? The IRA funds will be transferred to my checking account and I will then write my daughter a check.

  44. We have to pay my mother 90k for the house and the gift of equity is being used for the down payment/closing costs. How does this work? We are being told our total loan would be for 115k but the “gift letter” the bank is wanting her to sign has the total at 115k not the 25k equity amount….We are confused and not getting the answer from the bank other than this is the way it has to be on paper…. We do not want her to have any issues w/ her taxes next year showing she made a profit off the house. She has 90k in it so that is what she wants for it and doesn’t want anything saying more money than that. Can you explain this please. Thanks!

    1. Hi Mandy:

      Other lenders may have different requirements. We require that the gift amount be listed, not the overall purchase price of the house as if there was no gift, which it sounds like your lender wants. I also can’t really advise you on whether there would be any tax implications due to the gift letter. That’s a question for a tax professional.


  45. Hi. I am planning to buy a property from a family member. The house is appraised $228,00 and she owes nothing. She is selling it to me for $220,00. My credit score is in the 700’s. Do I need to come up with a down payment. Also the loan interest rate would be the same as if I were to buy the house at the regular price $228? Thank you

    1. Hi Alicia:

      Whether you need to come up with any portion of the down payment depends on the size of the down payment as well as what loan program you end up going with. One of our Home Loan Experts could go over that with you at (888) 980-6716. I can tell you that the interest rate is based in part on the size of the down payment, but it doesn’t make a difference where the down payment comes from in terms of the type of rate you would get. In terms of the tax implications, I recommend talking to a tax professional. Hope this helps!

      Kevin Graham

  46. Hi. I am planning to buy a property from a family member. The house is appraised $228,000 and she owes no mortage or in otherwords it has been paid off. She is selling it to me for $200,000. I believe my credit score is around 753 do I need to come up with a down payment? Also would I end up paying more to IRS or would she be paying taxes for this gift of equity? Thanks

  47. I am buying a house. I have some money with me and my wife is gifting me the rest of the down payment. But she also received a gift from my father and my friend. ( helping us to grow and move forwared – this is also a gift from them to her). ( no need to pay back).

    our mortgage company said they dont need any documentation as her account is different than my account and that she is nto the primary on teh house.

    Are there any complications down the lane from the money she received a gift from. My dad is in a different country but my friend is here.

    Please suggest. i dont know all the rules of this gifting. I was told, only if I recieve the gift i have to show documentation. but the the gift given to my wife by someone else does not need to be documented.

    please suggest.

    1. Hi Bala:

      I would just be sure to follow the guidance of your lender. If the money is ultimately coming from your wife and they have no problem with it, you should be OK.


  48. What happens when that relative is forcing you to pay the gift of equity back? I thought it was a gift. Is that legal ? It was a relative who dropped the price of the house so my husband and I could be approved for the loan.

    1. Hi Jamie:

      It’s not legal. In fact, you should have a document for your mortgage company that’s a gift letter stating you don’t have to pay it back. That’s a requirement to get a mortgage. That letter should be legally binding. Hope this helps!

      Kevin Graham

  49. My father in law is selling us his home. The gift of equity is in the amount of $161,500 I believe. We are going to use that for down payment, but the question arises in the buy down of points. If we use the gift of equity to buy down the points, can we write that amount off for 2017 tax return? Or does the buy down then need to be amatorized over the course of the loan?

    1. Hi Joe:

      This question is a bit complex and may depend on how your loan is structured. I want to make sure you get the right information. With that in mind, one of our Home Loan Experts would be happy to talk to you if you give us a call at (888) 980-6716.

      Kevin Graham

  50. Hi,

    So my parents are selling me there house that was appraised @178,000. FHA only gives 85% of the loan. They are telling us because it’s a non arms length transaction there telling us we need to put 15% down which is 26,700 that they was my parents to give us as a gift of equity. Can the that 15% be waived because we’ve lived i the house for 5 or more years?

    1. Hi Robin:

      I’m going to recommend you talk to one of our Home Loan Experts in order to get you a definitive answer. That being said, depending on how your parents were using the home, you may have to put down 15%. However, there’s nothing that stops that from being a gift of equity from your parents. You can reach out to us by calling (888) 980-6716 and someone will be in contact with you.

      Kevin Graham

  51. I came across this blog and has been very informative. But also opened some new questions for me.

    Q. If an In-Law gifted my wife and I 150,000 and we put that into a construction loan. What is the tax repercussions with that? We own land already and wanted to build a newer home on it and have them move into the current home as an in-law suite.

    1. Hi Seth:

      We generally avoid giving specific tax advice because we’re not tax professionals. However, under certain circumstances, it’s possible that your in-laws would have to pay gift tax. This article may have more helpful information. Always consult a tax professional when in doubt.

      Kevin Graham

  52. Hi,
    Our daughter and son-in-law are applying for a loan. Our daughter was told she had too much debt to ratio income because of a loan she had taken out through Navient. My wife and I have been repaying the navient loan for over two years. So we paid off the navient loan, sent the navient receipt that the loan had been paid off. We even signed a letter stating that it was a gift to our daughter but now the quicken loan officer says that we need to provide documentation from our checking account about deposits and give explanations about deposits that are made to our checking account. What gives?

    1. Hi Larry:

      With any gift regardless of what it’s used for, there are certain requirements regarding evidence of deposit and transfer of the funds. I’m going to have someone reach out to you about this to go over it in more detail, but this is a requirement of the major mortgage investors. There are various ways you can give evidence. Someone will reach out.

      Kevin Graham

  53. How much in gift equity is allowed on an fha transactio? And does it make a difference if the borrower is currently renting the property from the seller (her brother)?
    I have been told that there is a cap. My daughter is buying a home from my son. My son does not live there. The sale price is 235,000 the current value is 256,000. The seller owes 169.000.
    After the sales price there is 21,000. Can all of this be used towards closing and down?

    1. Hi Sherry:

      There is no limit on the amount of the actual gift. If she had a credit score between 580 and 620 we would require that she put down at least 3.5% of her own funds, but that wouldn’t limit the gift amount. However, since it’s a non-arms length transaction and it’s not her brother’s primary residence, what you might run into is that the down payment has to be at least 15% in this situation under FHA. That does include the gift funds. I’m going to recommend you speak with one of our Home Loan Experts to go over your situation more thoroughly and give you better information. You can get a hold of them at (888) 980-6716.

      Kevin Graham

  54. My grandparents are selling me their home. It appraised for 115,000 and they are selling it to me for 100,000. My lender is requiring me to put down 5%. I asked about doing a gift of equity to cover my closing costs since we are buying it for 15k less than it appraised for and my lender doesn’t seem to know how a gift of equity works. She explained to me that my grandparents have to take out a heloc, hand me the cash from the heloc to use towards my downpayment, then I purchase the house from my grandparents at their new loan amount (what they originally owed plus the heloc amount) but from everything I have read, I don’t see one mention of the seller having to do a heloc to get the down payment money. What they are telling me isn’t accurate, correct?

    Where does the actual money come from? No one is actually bringing a check of 5% to the bank, right? Is the 5% more or less “waived” because we are purchasing the house for less than whats it worth?

    1. Hi Kyrstin:

      I’m going to break this down a little bit. With certain loans, depending upon the type of property you’re buying and whether it’s conventional or FHA for example, clients are required to bring a certain amount of their own funds to contribute to the down payment. It sounds like this particular bank is trying to find a way for you to get those funds and source them. However, you’re not always required to bring your own funds to closing. At the end of this, I’m going to recommend you speak with one of our Home Loan Experts so we can give you more definitive advice on your situation.

      In terms of the actual gift of equity itself, you’re right. No one is actually bringing the gift funds to the bank. They’re selling you a property for less than it’s worth and giving you equity which is tied to the value of the house. There is no physical money in the gift itself in this case.

      In order to look into whether you have to bring your own funds, I’m going to recommend you speak with one of our Home Loan Experts. You can get in touch with them by calling (888) 980-6716. I hope this helps!

      Kevin Graham

    1. Hi CS:

      That’s an excellent question and I want to make sure you get the right information. One of our Home Loan Experts will be happy to help you if you call (888) 980-6716. Thanks for reaching out!


  55. Buying my in-laws house for 102,500 they gave me a gift of equity letter ,, the house appraised at 114,600. I want to use the gift of equity as the down payment of 20 percent. What happens to the difference in the selling price minus the 20 percent for down payment where does the rest of the equity gift go???

    1. Hi Dave:

      if I’m understanding you correctly, your parents are selling you the home which they would normally market at $102,500 with a 20% discount, so you would be paying a total of $82,000. If that’s the case, you get the equity and you would have almost 29% equity. If you were paying 102,500 and the house appraised for $114,600, you would be getting just over 10% equity. Hope this helps!


  56. If my daughter is buying a home and her grandparents are going to gift her $1500 towards to closing cost on a conventional loan, how does that work?

    1. Hi Cathy:

      Assuming it’s a one-unit property, your daughter isn’t required to make a minimum contribution to her down payment. She just has to make sure the down payment includes enough to cover the minimum for whatever loan she’s getting.

      Beyond that, her grandparents need to provide a gift letter that includes the following:
      The donor’s name, address and phone number
      The donor’s relationship to the client
      The dollar amount of the gift
      The date the funds were transferred
      A statement from the donor that no repayment is expected
      The donor’s signature
      The address of the property being purchased

      Then the lender would need proof of transfer that can come from a withdrawal and deposit slip or a copy of the check and a bank statement showing the receipt of the funds, for example. Hope this helps!

      Kevin Graham

  57. we currently live with our inlaws We are going to do a gift of equity loan. But now told that the inlaws have to move in order to do the loan. Is that accurate? why can we not do the zero out of pocket if we all currently live together. we are simply trying to get the house in our name.

    1. The reasoning for this is that if you both live there, it’s seen as a bailout transaction. The way to do this would be to get a quitclaim and pay them consideration, but you can’t get a mortgage.

  58. What is the maximum amount allowed to be gifted from grandparents to grandchildren? Pertaining to selling their home for less than the appraised value.
    Thank you

    1. Hey Chris! There’s no specific maximum amount, although you may be required to put in a certain amount from your own funds depending on the type of loan you’re getting and the amount of the gift. Thanks, Allison.

  59. Hi Kevin,
    I have been reading about the “gift of equity” option. I understand that if the home appraises for more than the relative is asking then the difference can be used towards the down payment and closing costs.
    My question is this:
    Is this real actual money, this gift of equity?
    If it is, where does it come from?

    We are buying my mother in laws secondary home. She owes $115,000 and that is what she is asking. If it appraises for more, then the difference can be used as a gift of equity. I understand that portion but there seems to be a gap. The gap being…where is this money coming from?

    To be certain, our actual loan that we would pay back would only be the $115,000 and NOT $115,000 PLUS the gift of equity amount? Is that correct?

    Thank you,

    1. Hi Angel! My name is Miranda and I work with Kevin. I want to make sure we’re giving you the right info for your specific situation. You can call (888) 980-6716 to talk with one of our home loan experts and they can help you out.

    2. I too would like to know the answer to this question.

      Is this “real actualy money”, this gift of equity?
      If so, where does it come from?

      I am in the same scenario right now and I am very confused by this.

      1. Hey Jen! This is definitely a great question. Privacy is really important to us at Quicken Loans®, and we value one-on-one communication when it comes to discussing your private information. So we encourage you to speak with one of our Home Loan Experts at (888) 728-4702.They will be able to give you the most accurate information regarding your specific question. I hope this helps! – Allison Hendricks

    1. Hi Taylor, Depending on the type of loan, you may be able to use the gift to help pay off credit card debt in order to qualify. I’m going to recommend you speak with one of our Home Loan Experts by calling (888) 980-6716, who can give you more information based on your situation.

  60. I have a house valued at $260,000 and would like to sell it to my son for $210,000, so he receives $50,000 in gift equity. The house was previously a rental property, so I will be required to pay taxes on any capital gains. Which of these two prices will be used as a basis for calculating capital gains tax?

    1. Hi Angela:

      I can tell you about mortgage policies, but for tax advice we really recommend talking to a financial advisor or tax preparer. That’s the best advice I can give you.

      Kevin Graham

  61. So I am getting a house that me aunt owns meaning she owes nothing on this house. For $90,000 but if she puts it at sale price of $120,000. And gifts my $25,000. Would I still be paying downpayment or closing cost. If so how much and it would be a conventional loan.

    1. Hi Michael:

      Gifts of equity work based on fair market value. The gift of equity is the discount she gives you off the fair market value. So if the house appraises for $120,000 and you pay $90,000, you’re getting 25% equity right up front. You may not get quite that because some of it could be used to pay closing costs. However, you wouldn’t have to make a down payment because you’re getting more than 20% equity from the gift. Hope this helps!

  62. My mother owes 70,000 on the home she is selling me for 80,000 (so I can get 10,000 back for remodel). Home is appraised at 190,000. I know I can use my gift of equity to pay for closing cost and any money down BUT is the % down based on the selling price (80,000.00) or the appraised value (190,000) ?

    1. Hi Mary:

      The down payment percentage is the sale price relative to the current market value. In effect, you have a 42% down payment. Hope this helps!

      Kevin Graham

      1. Hi Kevin, I’m in a similar situation as Mary. But it’s a transaction between siblings. Are you saying that Mary would not need to put any money down? Also, what would the sale price be? will it be $80k or will it be the $190k?

        1. Hi Rick:

          If you get a gift of equity on a one-unit primary property with an FHA or conventional loan, you don’t need to contribute any of your own money as long as the gift is equivalent to at least the minimum down payment. The sale price would be $190,000 in Mary’s situation. The amount of the gift of equity you’re getting is accounted for in the accompanying gift of equity letter. Hope this helps!

  63. Hi Kevin,
    We are purchasing my mother in laws home, she is selling it to us for $220K and it’s worth $260K. She currently owes $160 but my question is, since it will be an FHA loan, do we will need to have mortgage insurance?

    1. Hi Roxanna:

      So the discount on the value does count toward your down payment. However, because it’s an FHA loan, even though your down payment is more than 10%, you still have to pay mortgage insurance for 11 years. It’s a federal government requirement.

      Kevin Graham

  64. A family member has passed away and their domestic partner was given a gift of equity. My question is what happens if they do not use the gift of equity towards the purchase of the house if they have not received the actual distribution or check first. The distribution on the estate has not happened yet however he has closed on the property. So how does that play into the fact. Does that gift of equity become null and void?

    1. Hi Barb:

      I’m honestly not sure of the answer to that question. One of our Home Loan Experts may know more. Tomorrow, the company is off for Memorial Day, but you can get in touch with someone on Tuesday by calling (888) 980-6716. They may be able to give you more insight.

      Kevin Graham

  65. Is this correct? A gift of equity isn’t real money. It must be added to the cost of the mortgage.
    My brother is selling me a house that appraised at $168,500 for $126,500. That $42000 worth of equity is available to use for down payment, closing costs, etc, BUT however much of it is used MUST be added to the amount of the mortgage. Money isn’t free – the equity to borrow against is the gift. Am I right or all wet? Thanks!

    1. Hi Tim:

      I don’t think I’ve ever been happier to tell someone they’re wrong. Your brother is choosing to sell to you for a reduced price. Therefore, it wouldn’t have to be added to the mortgage. Your brother’s only obligation is to pay off whatever existing mortgage he had on the property. If you chose to give whatever profit he would take back to you, that’s his choice. It’s free money. Hope this helps!

      Kevin Graham

  66. Hi guys I have a question. my husband is buying a house under his name. Can I take home equity loan out on my house which is under my name only and gift him the down payment for the purchase of new home which will be under his name?


    1. Hi Johary:

      That’s something you could do. If you were getting an FHA loan, you would have to provide the loan documentation and the HELOC would have to come from a different lender because the entity gifting the funds can’t be party to the mortgage transaction, but it is possible.

      Kevin Graham

  67. Does my parents mortgage debt need to be paid off before they can give me a gift of equity. They have about 20 years paid into their 30 year mortgage.

    1. Hi Mike:

      The only requirement when giving you a gift of equity is that you pay enough to pay off the outstanding balance on the mortgage. Once that’s paid off, they have the option to give you whatever equity is left over.

      Kevin Graham

  68. How does receiving a gift of equity affect tax basis when I later sell the home?

    My situation: dad sells me the house at fair market value $520K, with a gift of equity of $120K; so I have just a $400K loan, no down payment (more than 20%).

    In 10 years when I sell the home, what is my tax basis for determining capital gains?
    is it a) the full sale price including gift of equity $520K
    b) the effective purchase price of $400K (market value minus equity gift)
    c) my dad’s original tax basis (which is very low)
    or something else?

    Thanks in advance. Doing the deal, just considering what the tax implications are.

    1. Hi Reno:

      Unfortunately, for most tax questions including this one, you’re really better off talking to an accountant or tax professional. It’s also worth noting that it’s hard to say what the tax law will look like by the time you sell the property. That said, I would definitely talk to a tax expert.

      Kevin Graham

      1. Ok, taxes I have figured out.
        Now A LOAN question:
        I am in the middle of writing a purchase agreement with gift of equity from my father.

        How do I write the purchase agreement for a gift of equity?
        Is the Purchase Price the actual amount you’re buying for
        Purchase Price $400K
        Gift of Equity $100K
        Appraisal Value $500K
        This is how the IRS accounts for a part gift – part sale because you are not purchasing for 500K, that is a ficticious number and not taxable or usable by the seller.

        With this structure can your loan processing figure that the loan LTV (80%) and down payment is based on appraisal value because it is a family sale with gift of equity?

        Or, because of loan technicalities does it need to get written as
        Purchase Price $500K (appraisal value)
        Gift of Equity $100K
        Actual sale price $400K?

        Fannie Mea/FHA don’t seem to have details; only that a 20% gift is allowable and means no down payment; they don’t explain purchase price appraisal value, or how the gift is calculated or if it needs to be in the purchase agreement.

        1. Hi Reno:

          I’m going to recommend you speak with one of our Home Loan Experts to make sure this all goes smoothly. Based on our guidelines, it doesn’t look like the gift of equity has to be placed in the purchase agreement. Those are details you work out with the lender. The fastest way to get the best information on this specific to your situation is to call (888) 980-6716.

          Kevin Graham

  69. Hi,
    My parents gave me $10,000 as a gift down payment on a conventional condo loan last year and were told they can use that to write off on their taxes. They are now told they can’t do that since they didn’t put down $14K. I’m confused since I read up to $14K they can write off??


    1. Hi Janice:

      I believe they can write it off, but I would find a qualified tax professional. Because every situation is different.

      Kevin Graham

  70. my mom wants to sell me the house for 300.000 the house still has about 120.000 that she still needs to pay.

    the house is worth 400.000

    can i get a loan for 300.00 pay off the house and give her the rest (180.000)

    1. Hi Ester:

      In theory, that’s how it works. I’m going to recommend you get started by talking to one of our Home Loan Experts about this by filling out this form or calling (888) 980-6716. They’ll be able to go over the details and help you out.

      Kevin Graham

  71. I am selling my house to my daughter for far less than the appraisal amount. The home is worth (according to Zillow) $447000. I’m selling it my daughter for $299000. I owe $239000. Can the equity in the house be used as a down payment and closing costs? And is it taxable to either one of us? What would be the loan amount my dauggter should apply for? She does not have the funds for a down payment

    1. Hi Tammy:

      A gift of equity may be used toward the down payment and/or closing costs on the home. There’s the possibility it could be taxable, but that depends on your situation. For that advice, we would really recommend going to a tax professional. Loan amounts are based on how much she could be preapproved for and I can’t give you an answer to that in the comments. I’m going to recommend you have your daughter speak with one of our Home Loan Experts by filling out this form or calling 888-728-4702. They’ll be able to go over her situation in greater detail.

      Kevin Graham

  72. My cousin wants to give my wife and I $5000.00 toward our down payment. If we plan to use a FHA loan, will we need to still provide the entire 3.5% or the reminder after the $5000.00 is applied?

    1. That depends on your credit score. If your credit score is between 580-619, you have to contribute 3.5% toward your down payment from your own funds. And then your cousin’s funds would be added on top. Otherwise, the funds from your cousin can be applied and you will just have to make up the difference to get to 3.5%. Hope this helps!

      Kevin Graham

  73. Hey Kevin, We are buying a house and have family members who want to give a gifts but don’t want to disclose there whole bank account statement. It’s an FHA loan..what other options do they have? Shouldn’t a gift letter be enough?

    1. Unfortunately, the FHA has very specific guidelines on this point. Bank statements are required to prove where the funds are coming from.

  74. My fiancé and I are looking at buying her parents house this coming year . We are first time home buyers and they would also be selling us the house for $40,000-$60,000 below what it was appraised at . My question is will that amount be considered the gift of equity ? And can any of that amount be put towards the down payment and closing cost ? Will we have to have any contribution out of our pocket starting off? Thanks !

    1. Hi Brian:

      Yes, the amount they are discounting the sale price would be considered the gift of equity. It can certainly be put toward down payment and closing cost. Whether or not you need to come out of pocket for anything else depends on a couple of things: the ratio comparing the amount of the loan to the value of the house and potentially your credit score. To give you more concrete answers, you would have to talk to Someone. I’m going to recommend you reach out to one of our Home Loan Experts by filling out this form or calling (888) 728-4702.

  75. My husband and I are purchasing his mothers home and she’s wanting to gift us the equity from the difference from the sale price and what she’s going to except for her self. She wants to gift us the equity to pay off her debt so we can get the loan easier what loan qualifies that . Is this something we can get threw quicken loans.

    1. Hi Krystal:

      We can definitely help you look into your options as far as a gift of equity is concerned. To get into the details and what you might qualify for, you’re going to have to talk to one of our Home Loan Experts. You can get in touch with them by filling out this form or calling (888) 728-4702.

      Kevin Graham

  76. My parents and I want to trade houses with each buying the others for the amount of the outstanding mortgages. Both houses will appraise for more than the mortgage amounts. We all have excellent credit. Can the gift of equity be utilized in both directions? Is there additional funds/fees that would be required by either party? And how would this be handled? Thanks.

    1. Hi, Niki!

      This is definitely a unique situation and to determine if it’s possible, you’ll need to speak to one of our home loan experts. Give us a call at (888) 635-1576.

      Thanks and have a great day!



  77. how much money can i gift to my daughter and son-in-law? received my mother home as part of my inhieritence $33000. will they have to pay taxes on this?

    1. Hi Paul:

      The gift tax limit is $14,000 according to the IRS. Typically, you would pay the tax unless your daughter and son-in-law agreed to some other arrangement. Hope this helps!

      Kevin Graham

  78. My father wants to give me a gift of equity to purchase his home which is in a Reverse Mortage. He owes 325k on the home and it should appraise for 400k+. Will the mortgage reflec the gift of equity as equal to a down payment of 75k , so that my mortgage payment is reflecting a “down payment” of 75k? Or will it reflect an amount of a loan without a down payment, but just act as collateral?

    1. After the reverse mortgage is paid off, your father can gift you whatever remaining equity he has and it acts as the down payment. Hope this helps!

  79. Hi Kevin, we are working with quicken right now on a conventional loan. My mom gifted us over 20% down. Quicken is requiring HER bank statements although everything I’m reading here and other places says that donor bank statement are only req’d for FHA loans. My mom is unwilling to release her bank statements for privacy reasons but is willing to provide any other proof (that isn’t so invasive). Who can I talk to about the requirements?

    1. Hi Jen:

      I’m going to have someone contact you. We’ll see what’s going on here and how we can help you move forward with the process. I can tell you that we treat all client provided information with the strictest confidence. We have a number of security measures in place. We take client privacy very seriously.

      Kevin Graham

  80. My mother is giving me the deed to her house. She was given the deed by her mother. My question is, can I get a loan to pay off some debt that I have to improve my credit score? I want to pay off my car and some outstanding collection items on my credit report. I also owe some money to a couple of friends. Thank you for any information you may have.

    1. Hi Melissa:

      We can certainly help you look into your options. I’m going to recommend you talk to one of our Home Loan Experts because collections may present problems depending on the type of loan you want to go with. Also, you may have to be on the title for a period of time before you can take cash out. You can get in touch with them by filling out this form or calling (888) 728-4702.

      Kevin Graham

  81. Dear Kevin,
    My wife and I are in the process of being gifted a house from titled to our son and her niece. House appraises for 360K and Mortgaged for 168K. We are receiving an equity gift for 20% down and full closing with a sales contract for 217.5K ending in a mortgage of 174K.

    My question is, can the sales contract be say 352K and the equity gift includes an additional100K which go to the buyers at closing for a cash out Mortgage of 274K ?

    This essentially provides a total gift for donors tax purposes of 170K+ to be used for the annual limit and life time gift exclusion.

    1. Hey Steven:

      That’s a very good, but also very complex question. My advice is to talk to one of our Home Loan Experts. They’ll be able to give you better advice than I can on this issue. In terms of the tax portion, you may actually be better off talking to an accountant or someone that specializes in tax issues. If you would like to speak to someone regarding the gift and the purchase agreement, you can do so by filling out this form or calling (888) 728-4702.

      Kevin Graham

  82. You make it sound so easy… We are going through USAA for or mortgage (mistake). They walked us through the process of a gift of equity but come closing the loan was so messed up the title co literally left.

    Our condo is valued at 195,000 and our parents are selling it to us at 125,400. The gift of equity should be more than enough to cover a down payment according to your article. USAA is under the impression that the gift of equity cannot be used for this and is only a figurative number we receive after purchase.

    I’m confused

    1. Hi Robert:

      It’s possible that different mortgage companies have different policies. With us, a gift of equity is able to be used toward the down payment unless you’re doing a VA or jumbo loan. There’s a minimum client contribution in certain cases, but you can still do the rest as a gift of equity. I highly recommend you talk to one of our bankers who can help go over your situation and talk through any potential options. You can do that by filling out this form or calling 888-728-4702.

      Kevin Graham

  83. My mother in law wants us to buy her house. It appraises for $253900. She owes 138500. She is going to sell it to us for what she owes, how do we use the gift of equity? We also have a lower credit score due to issues from 2010. Can we get a loan? Thx

    1. Hi Kim:

      Given your situation, I’m going to recommend you talk to a mortgage banker. They can go over how to set up the gift of equity and also look into your credit qualifications. You can go ahead and fill out this form or if you want to get started over the phone, call 888-728-4702.

      Kevin Graham

  84. The home we are purchasing is from a long time family friend. FHA guidelines have loan limits of $271,000 for our area. Home purchase price we have agreed on is $300,000, and appraises for $325,000. Can they do a gift the of equity? And how does that work with the home appraising higher than FHA loan limits. Would 3.5% downpayment be on $271,000 or appraised price of $325,000?

    1. Hi Rhonda:

      Since this is a friend and not family, they can’t do a gift of equity. They can only do a down payment gift. This also gets a bit complicated because of the limits involved. I’m going to suggest you talk to one of our licensed mortgage bankers. We can put you in touch with a mortgage banker if you fill out this form.

      Kevin Graham

  85. We are getting a gift equity to buy my mother in-law house ( she is decease ) the FHA loan is going to be on my name I qualify for it my question is do I have to be on the title my husband is, to get the FHA loan? Is a cash out we need to pay the two other brothers

    1. Hi Donna:

      If the loan is in your name, you need to be on the title. Hope this helps!

      Kevin Graham

  86. Are there any tax consequences to either the giver or the receiver, especially with a gift of equity? IRS only allows a gift of $14,000 per individual giver.

    1. Hi Kathryn:

      On the mortgage/house selling side, there really aren’t any consequences for giver or receiver. In terms of tax consequences, you’re better off speaking with a tax adviser. In addition to the federal tax issues, there may be different requirements depending on what state you live in.

      Kevin Graham

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