FHA Loan w/ Gift of Equity and 203K.

Asked by Arara, Vacaville, CA Tue Apr 16, 2013

I am trying to purchase my fathers home with a gift of equity. I was told by a Mortgage Advisor recently that FHA guidelines require 15% down when you have a non-arms length transaction (which means you are buying from a blood relative).
I thought you could purchase with the FHA standard downpayment with a gift of equity?

I am also interested in a 203K loan for the property. The house was built in the 1950's and is need of renovation. How can I go about obtaining this? Is it difficult to do?

Thank you for any advice!

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, ,
Tue Apr 16, 2013
So we are clear, here is what FHA states, if a borrower is purchasing a home for a direct family member, and the buyer is NOT living in the home, we can only loan you 85% of total purchase price. Now if you are living in the property that's a different story. FHA requires that you have been living in the property for a minimum of 6 months, then you can do a straight purchase and Dad and gift you through escrow an unlimited amount of money and can pay all your closing costs. You have two options available to you. I can discuss this with you over the phone as through email is too difficult and you will have too many questions.

Take care,
Web Reference:  http://www.AFN-Loans.com
1 vote
Thanks, that is what I needed to know concerning the FHA loan & the gift of equity. I don't live in the home, so now I understand the 15% down policy.
Flag Tue Apr 16, 2013
Rosegudy, Home Buyer, Dallas, TX
Thu Jul 23, 2015
Borrowers receive a gift of equity when the owner of a house agrees to sell them that house at a price below its appraised value. A seller might sell a home that is worth $200,000 for $170,000. This gives the buyer instant equity of $30,000. That's more than enough to allow the buyer to cover the FHA's required down payment of 3.5 percent. The seller, then, has paid the down payment for the buyer by providing that buyer with this equity.

The FHA also allows buyers to use cash gifts -- these can come from friends, relatives, co-workers or anyone -- to help cover closing costs or down payments. Again, the person making a cash gift must treat it as a gift, with no expectation that the buyers will repay the gift.

Web Reference: http://fhamortgageinfo.com/
2 votes
Gaquattlebaum, Home Buyer, Vallejo, CA
Wed Jan 15, 2014
Hello. We live in my father in law's house for the last 19 years, he wants to sell it. The house was built in 1968 and needs repairs extensively. My wife is the legal adopted daughter( her mother married her adopted father when she was 6, her mother died 3 years ago) can she still qualify for a FHA 203k loan.
We live in Prince George's County, Maryland
0 votes
Dana Lindberg, Both Buyer And Seller, Phoenix, AZ
Sat Sep 21, 2013
203k loan is designed to help home owners who are in need of financial help for home repairs, renovation, and even new purchase. 203k is a very good program however, getting it is not the easiest process. You have to team up with a great lender who is knowledgeable about it.

Dana Lindberg
CFS Mortgage - http://www.cfs203k.com
0 votes
Josh Barnett, Agent, Carney, OK
Tue Apr 16, 2013
Talk to the lender that advised you on the arms-length transaction about your questions, you do not want to mess around when borrowing money from a government backed loan.
0 votes
Luis Romero, Agent, Vallejo, CA
Tue Apr 16, 2013
you need to speak with the lender who is doing your loan, if you do not have one call Kevin Rahill at 707-246-1010, this is not a job for someone new in the lending industry, He has 20 experience.
0 votes
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