You are talking about a gift of equity. I am not a huge FHA fan if you read any of my other posts on mortgages. FHA will allow gifts of equity from family members. I am not sure if the FHA limit in Long Island is high enough to do a loan over $300K.
From a legal standpoint (some account can probably give you the exact rules), I believe I can make a gift of $20K a year to anyone without any tax issues. Aunt could give you $20 and Uncle give you $20 and have no tax issues (check on that). Shouldn't be a tax for either parties. One other place taxes could come in is if it is an investment property currently for your Uncle. In which case his sale price would be higher thus capital gains are due on the higher sale price.
A Fannie Mae or Freddie Mac loan has a gift of equity rule of 20% gift doesn't matter. A gift of less than 20% requires the borrower to have 5% of theri own funds into the transaction.
If you want to know how to beat the system. Have the investor have their appraiser tell you what the property appraises for. Lets say $340K. Then write a purchase agreement for $340 and seller pays say $10k in closing costs. Do a stated income, stated asset program (state you have the money in the bank) through US Bank or Bank of America for 90% of $340. Find a way to show up with 10% and then have the uncle gift you the 10% after the fact. You will avoid the above Fannie Mae rule.
Does that help?
From a legal standpoint (some account can probably give you the exact rules), I believe I can make a gift of $20K a year to anyone without any tax issues. Aunt could give you $20 and Uncle give you $20 and have no tax issues (check on that). Shouldn't be a tax for either parties. One other place taxes could come in is if it is an investment property currently for your Uncle. In which case his sale price would be higher thus capital gains are due on the higher sale price.
A Fannie Mae or Freddie Mac loan has a gift of equity rule of 20% gift doesn't matter. A gift of less than 20% requires the borrower to have 5% of theri own funds into the transaction.
If you want to know how to beat the system. Have the investor have their appraiser tell you what the property appraises for. Lets say $340K. Then write a purchase agreement for $340 and seller pays say $10k in closing costs. Do a stated income, stated asset program (state you have the money in the bank) through US Bank or Bank of America for 90% of $340. Find a way to show up with 10% and then have the uncle gift you the 10% after the fact. You will avoid the above Fannie Mae rule.
Does that help?
The Right Wing said:
Wasn't sure of the fha limit in NY, didn't think it was that high but might be close. You can in effect do 100% with gift of equity being the 3% needed into the transaction for fha. In conventional the gift of equity can be any amount, say the gift is 10%, then the ltv could be 85% because the buyer needs to have 5% into the transaction. If the gift is 20% then the buyer doesn't need to have anything into the transaction. Thats the reason I have them agree to a price and then see what the high end of the appraised value is. I am pretty sure those are fannie mae and fha guidelines although i haven't done a gift of equity in a year or so.
