Gift Of Equitty
what is it and is it real money that must be shown at the settlement table? ex. we are buying a property from a relative and we got a commitment from the bank and the loan officer asked about a gift of equity and we told them they were giving a gift of $10000.00 equitty. and when we got the commitment letter in the mail there was a section that said the gift had to be deposited in a savings acount and shown at closing. how is that possible when it is a gift of equitty on the property that we are buying? im really confused...... 
Not exactly sure what is going on here, but usually a relative can gift you up to like around 11K without getting taxed on the gift. Anything over that and Uncle Sam will have a crack at it. Whatever amount they decide to gift to you must be shown in an account before closing to prove that its there.
If your relative is selling you their property, why would they give you a gift of 10K? In other words, if you buy the property for 100K, why would it make sense to give you 10K back when they can just sell it to you for 90K? Again maybe I am just not understanding you here...
[addsig]
It sounds more like a 'seller's credit' than a 'gift.' Just write up an addendum stating that the seller (your relative) will be creditting you 10K for recurring & nonrecurring costs. Both parties must sign the addendum and send it to escrow.
Then the 10K will appear as a credit at closing reducing any upfront costs ie loan points, origination, escrow fees, etc. you would have had to pay. Anything left after all fees are paid should be refunded to you after escrow closes.
can this only be done with relatives or any seller? what does recurring and non-recurring cost mean?
[addsig]
Any seller may credit a buyer for closing cost etc. They can "contribute" up to 3% of the sales price or appraised value, whichever is less for conventional mortgages (Freddie Mac, Fannie Mae).
[addsig]
thakyou for your input on this matter i was confused about it.
Quote:
On 2003-08-22 03:38, 4-S-INVESTORS wrote:
can this only be done with relatives or any seller? what does recurring and non-recurring cost mean?
Yes, it can be done with any offer to purchase so long as both parties agree to those terms.
"Recurring & non-recurring costs" is just a fancy name that includes all costs that pertain to the sale that both parties agree on. IE repair credit, closing cost credit, loan points, HOA dues credit, whatever you can think of. Using those words prevents the seller from being able to discount you on the agreed upon credit by trying to precisely tally up the costs then attempts to recoup the balance if the total is less.
WHEW! I hope I'm making sense.