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Guest

Hello,

So my wife and I are planning on buying her grandmothers house from her father and his two brothers. The house is appraised at 450,000 but we would only need a 300,000 mortgage as he is giving us a 150,000 gift of equity.

Her credit score is 700 mine is 650. I have been employed with my company for 5 years. We have paid down our credit card debt to under $500. We have about 5,000 in savings.

Would the 150,000 gift enhance our chane of getting mortgage approval?
How do lenders view this and anyone see us having a very hard time getting approved?

Thanks.

gmakerley · Posted: Wed Sep 30, 2009 7:16 am Post subject:

you didn't tell us anything about income, boston, but i'll take it for granted that you'll have sufficient income to do this transaction. you certainly don't have any debt to worry about.

that you'll only be borrowing 67% of the home's value is definitely favorable - gifts of equity are perfectly legitimate and though they won't be the deciding factor in your obtaining a loan, the reduction in ltv is definitely a good thing.

Guest

george ,
Thanks for the help. Our income is a total between 100,000 - 115,000 per year.

I do have about 30,000 in student loans. My payment is about 220 dollars a month. I was more concerned with that our savings being only 5,000 and our credit scores. We were hoping the LTV would balance that out sort of.

gmakerley · Posted: Wed Sep 30, 2009 8:22 am Post subject:

you may have to use some of that gift money to cover closing costs, which would, of course, increase your mortgage amount somewhat. with that income, your debt ratios would certainly appear not to be an issue.

Guest

Greetings all...

So after nearly 5 years of focusing on the finance sector and really enjoying every minute of it...the time has come to expand my horizons and take the next step in delivering great products for Microsoft. So as of very soon (date TBD) I will be moving to a Program Management role in a new product being developed in the Office division.

gmakerley · Posted: Wed Sep 30, 2009 12:19 pm Post subject:

based on my dislike for payday loans, i have to say it's kind of nice to see them go. i guess that means that all the nasty things people have said about them will be archived, since they won't exist any more.

jveenstra · Posted: Wed Sep 30, 2009 3:00 pm Post subject: Gift of Equity

Boston22....
Gift of Equity is fine. The gift of equity does not really need to be that large. It needs to be at least 20% of the purchase price to avoid private mortgage insurance and to avoid the ned that at least 5% of the purchase price being your own money.

To clarify what George noted above, you have $5,000 in savings and that does not cover closing costs and you should want to keep it besides. For example, making believe closing costs are $8,000. The purchase contract might read: We offer you $450,000 and the mortgage amount will be $308,000 if the seller contributes back $8,000 toward prepaids and closing costs. That way you spend none of your own money.
You could also say the mortgage is $300,000 if the seller pays $8,000 toward closing costs. The seller then clears $292,000. You have to back into what the seller actually wants to clear in his pocket.

Your credit score is 650. If you are getting a Fannie Mae or Freddie Mac mortgage, the credit score of 650 and loan to value of 67% will cost you 1.25 points more than it would if your credit score were 740 or higher. You may consider paying the 1.25 points to keep your rate lower. In that case, add the 1.25 points to the amount you are asking the seller to contribute at closing so you do not pay anything out of pocket.

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