Home Buying in Valparaiso>Question Details

Zach, Home Buyer in Indiana

I am buying a house. It is in a trust, left to my aunt and father. Can they give me a gift of equity? I have more questions but dont have enough space

Asked by Zach, Indiana Mon Nov 14, 2011

My grandfather passed away, my aunt and father inherited the house. Everything is in a trust. I was pre-approved for a house before all this happened. I want to buy my grandfathers old house. It needs work, but due to its condition still appraised at $168k. The lender suggested a gift of equity to get rid of the 20% down payment. I could use the money I had saved for a down payment to rehab the house. however, we are not sure how that will work with a trust? The lawyer handling everything cannot seem to answer the question, the lender cannot. I have googled for hours.. .Can anyone please answer the question?

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I do not believe you can have a gift of equity with a conventional mortgage with 20% down. You can with FHA which has different downpayment requirements. 3.5%. Will the home pass FHA 203B? or does the home need a FHA 203K which is a rehab loan. You need a more experienced loan officer to tell you what a lender will allow. Call Chris Henderon at McColly Mortgage in Schererville. 219-864-7539. Chris will be able to help you with your financing so you can purchase this home.
0 votes Thank Flag Link Wed Mar 27, 2013
Definitely speak with Chris. Our attorney is Patrick and he is amazing. He'll be able to answere any and all of your questions.
0 votes Thank Flag Link Tue Mar 26, 2013
Property is in a Trust, the trust pays the taxes. what does the appraisal say about the condition. is it cosmetic or bigger issues. you may be able to go traditional FHA with a 3-6 percent gift of equity. and Try Chris Henderon at McColly Mortgage. 219-864-7539. Chris has a Real Estate Attorney on staff and he will be able to answer all of your questions.


Good Luck with your purchase.
0 votes Thank Flag Link Thu Feb 7, 2013
Zach, I would be curious to know who you contacted and how it all turned out. I wasn't sure why you were putting down 20%. An FHA 203K loan would have allowed you to roll money for repairs into your loan.

Hope you got grandpa's house :)

Christine
0 votes Thank Flag Link Thu Apr 19, 2012
Zach:
Highly suggest you get a estate/trust or real estate attorney and ask these questions. You may have tax consequences to consider in getting the equity gift which could cost you out of pocket at tax season. Most lenders should be able to clear up whether the equity can qualify as down payment--but your own lender will have to do their own appraisal and determine the loan to value they seek--which may be around 80% of value. You might try either George Carberry (Corp) or Bill Ferngren (real estate), both attorneys in Valparaiso.

Best regards,

Matt Evans
The Matt Evans Team
Keller Williams Realty Leaders
219-241-8401
0 votes Thank Flag Link Wed Nov 16, 2011
It depends on the type of trust and how complicated the circumstances are. If your aunt and father are the only heirs and make the entire decision then it is as simple as dealing with two sellers without a trust. If they are simply the trustees for a bunch of heirs then it becomes a lot more difficult.
About is it allowed for financing, yes, both conventional and FHA loans allow the entire down payment to be in the form of a gift of equity. Here is the blurb from my conventional underwriting manual:

A gift of equity is permitted for purchase of a primary residence The LTV should be calculated based on the purchase price or appraised value whichever is less. (The gift equity may not be deducted from the sales price before calculating LTV). With a gift of equity, no cash changes hands. Instead, the seller agrees to donate a portion of the equity in the subject property in lieu of all or a portion of the down payment.

Gift policy criteria must be met. If the LTV exceeds 80%, at least 5% of the down payment must come from the borrower’s own funds.

The following documentation must be obtained to verify funds:
Demonstrated family relationship; and
Gift letter explaining the type of gift is required; and
Gift of equity must be identified in the Sales Contract

Hope this is helpful.

Info on Rent to Own:
http://www.trulia.com/blog/jimsimms/2011/11/rent_option_or_r…

Info on the criminal side of Credit Repair:
http://www.trulia.com/blog/jimsimms/2011/10/credit_repair_ca…

Info on Down Payment Assistance in Kentucky:
http://www.trulia.com/blog/jimsimms/2011/03/down_payment_ass…
0 votes Thank Flag Link Tue Nov 15, 2011
I believe you can on a FHA Loan.. But there are some rules. I am going to suggest you call Ryan Eberhardt at Diamond Morgage.. I believe they are the ones who answered this for another client. His cell number is 219-309.9508. If you have any other questions please let us know...If they can't answer it try. Penny Fornari at A& M Mortgage 800-794-0634.

Good Luck..
Monty Willis
Monty Willis Team PC
219-464-4377
0 votes Thank Flag Link Tue Nov 15, 2011
Zach, looks like you might need your OWN local real estate lawyer who also has experience with trusts, to help you work this out.
0 votes Thank Flag Link Mon Nov 14, 2011
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