Financial Access, LLC "Property Ownership Within Reach" First and Second Mortgages · Purchases · Refinancing · Home Equity Loans · Lines of Credit Ph: 267-382-0690 Toll Free: 866-636-9300 · Licensed in Pennsylvania
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Case Studies -->> Gift of Equity Gift of equity from a related person is another source for the down payment or portion of the down payment to purchase an owner occupied property. A related person is defined as: The borrower's spouse, child or dependent An individual related to the borrower by blood, marriage or adoption A guardian of the borrower The borrower's domestic partner Fiance Verification of the gift must be in a form of a gift letter. The letter is supplied by the broker but must be completed by the family member/donor to contain the following. State the donor's name and address State the relationship of the donor State the repayment is not required or expected Letter signed by the donor Identify the address of the property being purchased State the amount of gift Evidence of the transfer and receipt of gift funds must be provided. A photocopy of the check from the donor and copy of the deposit slip into the borrower's bank account to show the paper trail of the gift. Documentation must be provided in the Agreement of Sale as gift of equity with the same amount to match the gift letter or application. The sales transfer tax that is paid at settlement is exempt for the seller and buyer in most cases because the transaction is considered to be a family deed transfer. The closing cost savings can range from 2% to 5% of the purchase price depending on the county. Example: Purchase Price = Gift of Equity = Total loan amount = $250,000   $50,000 $200,000     80% of the purchase price Closing cost savings if purchased in a county that requires 2% transfer tax is $5,000.