How to Buy a House from a Family Member

[vc_row][vc_column][ultimate_heading main_heading=”Gift of Equity” margin_design_tab_text=””][/ultimate_heading][vc_column_text]Buying a home using gift of equity from a family member has it’s benefits. Though there are rules that need to be considered when doing so. Below is a breakdown of the two most common loan programs used when gifting equity.[/vc_column_text][vc_column_text]

FHA Loan – Gift of Equity

Loan to Value Restriction

There is a 85% LTV restriction when it comes to buying the house of a family member unless

• The house you are buying is the family members current residence. or
• You can document living in the house for at least 6 months prior to making an offer on the home.

Credit Score 

If your credit score is below 620 verification of 12 months of on-time rent payments may be required. This is done by showing the canceled checks, print out of bank to bank transfers, or in the case of property management company having them complete a form.[/vc_column_text][vc_column_text]

Conventional Loan – Gift of Equity

Less than 20% Gift of Equity

If the family member is gifting less than 20% of equity there is a minimum required investment from the buyer of 5% down.

Credit Score 

Conventional loans require a 620 credit score or higher.[/vc_column_text][vc_column_text]

How Gift of Equity Works

It is common for family member to gift equity when selling a home to another family member to help cover your down payment. The ability to use gift equity for a down payment will be determined by how the family members are related. It is best to talk to a mortgage professional to determine what applies in your case.[/vc_column_text][vc_column_text]

Buying a home that is in a Trust

Sometimes a family member passes and the estate is put into a trust. In the case of siblings, they want to be paid out for their share of the home. Depending on the type of mortgage you get each will have different rules in relation to trusts. It is best to choose a loan officer who is experienced and can guide you smoothly through the process.

If you are considering buy a house from a family member in Utah, give Village Mortgage a call at 801-627-8888. We would be more than happy to answer your questions.[/vc_column_text][/vc_column][/vc_row]