lived in home with mom last ten years want to buy but was told had to have a 15% dp/she is not behind on payments. Why so much?
David Kosmecki (david_kosmecki)
#35 ranked lender in Minnesota - 259 contributions
Yes you need a 15% down payment HOWEVER it can be a "gift of equity". If your mom is selling you the home below value, you increase the price to market value and use the difference as a "gift of equity". What we are talking about here is FHA financing. Good luck
J.D. Peck (TheJDPeckLendingTeam)
#44 ranked lender in Colorado - 82 contributions
The purpose of this rule is due to the fact that there is already an established relationship between you and the seller (your mother). This is what is called a "non-arms length transaction". Unfortunately up until approximately 2007, there were many inflated purchase prices between parties who had an existing relationship. In addition, the primary purpose an underwriter will want to see 15% down payment is to confirm that you are not "bailing your mother out" of a negative equity situation. This is nothing specific to you, this is now an industry standard. David however is correct in stating that the 15% can be in the form of a gift of equity as long as the appraised value supports this amount.
Joe Metzler (JoeMetzler)
#17 ranked lender in Minnesota - 4,848 contributions
It is because you have a personal relationship and lenders are concerned about fraud. If there is enough equity, she can give you a gift of equity for down payment and closing costs, making your out of pocket costs zero. If you bought a different house, you would not need that much. www.MortgagesUnlimited.biz
Thank you all for the information. I understand why this may be required for someone who is in default and the fraud that can be involved but for someone just getting on in years and wanting to sell to family just doesn't make sense. She does have equity so we will go that route. So as long as the house appraises high enough we just go with the higher amount and FHA will accept the 15% gift down and closing costs too? Are there any problems with this transaction if she will continue to live in the home with us as we've done for the last ten years?
Jason Robinson (CFIsupport)
#56 ranked lender in Georgia - 106 contributions
Another option would be for your mom to add you on the title/deed, and refinance the home solely in your name after 12 months. Make sure you pay the payments with a check from your own account. Good luck
Peter Savino (855411LEND)
#99 ranked lender in New Jersey - 332 contributions
PLease contact me - I have a totally diffrent plan to discuss with you. www HOMEMORTGAGEXPERT.com
Dave Metsker (DaveMetsker)
#35 ranked lender in Oregon - 2,318 contributions
Add yourself to title, and refinance after 12 months.
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