A gift of equity is not allowed when the seller is an estate. This is even true when the buyer is family of the deceased. To use a gift of equity, see the deed requirements for an estate. Even if a gift of equity may not work out in this case, there are plenty of other ways to buy from an estate. Options other than FHA for Gift of Equity
FHA loan rules in HUD 4000.1 have specific guidelines where gift funds to the borrower are concerned. Gift funds are commonly used for home loan expenses including down payments, but when the borrower accepts gift funds for the purpose of making that down payment, the funds must meet FHA acceptability standards.
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FHA Loans, FHA loan requirements and guidelines for mortgage insurance, FHA Allows 100% Gift Funds: In addition to a low down payment, those funds can .
However, the FHA does allow others to provide you with gifts. They include your labor union, employer, a long-time friend that you can document has a close relationship with you, a charity, or a government organization. The FHA also determines who you cannot accept gift funds from for FHA loan closing costs.
· For gift funds to be accepted as “gift funds”, there should no repayment, whether implied or expected, of such funds by the borrower to the donor pursuant to Chapter 5, Section B of the HUD Handbook 4155.1. In short, they should not be repaid. Gift funds may cover 100% of the down payment and closing cost requirements of the purchase transaction.
FHA seeks to protect the borrower and does not seem likely to stop allowing the down payment to come from a gift, so they have simply made a few guideline changes around accountability for the gift. In short the gift must be sourced.
Among a bevy of improvements, the FHA has raised its loan limits; moved away from onerous repair and inspection requirements; and generally retooled. that organizations providing a down-payment.
FHA requires all gift sources and amounts to be identified as a source of down payment regardless if gift funds have been deposited into borrower’s account. Each individual gift source and amount must be listed on the FHA page. These gifts must be verified in writing.