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How can I use the equity in the house to my benefit?

Posted on: 28th Mar, 2007 03:15 am
I'm a little confused because she has $100,000 in equity on the house and she wants us to have that with the home. does it work that way? How can I use this to benefit me in the loan process? She still owes $160,000 on the home. Sorry for not understanding.

Thanks,
Larry
You mean your mother has yet to pay $160,000 on the home and there is $100,000 equity. Then you can borrow only against the equity in the home.
Posted on: 28th Mar, 2007 03:30 am
That's ok Larry, you need not feel sorry about it.

What I have understood from your query is that, you are buying the home from your mother by paying her $160,000. Most probably she has yet to pay this amount to the lender in order to repay the loan in full.

Your query in the last post was not clear to me. Now that I get it, the $100,000 is the equity that your mother has in the property. But the loan will be in your name. Now, it is up to the lender as to whether he will consider the equity.

However, in any case, it is not necessary that you will have to pay 20% down payment to the seller (your mother) in order to qualify for a conventional loan.

If you wish to clarify any more doubt, you can share it with this community.

Thanks,
James.
Posted on: 28th Mar, 2007 03:41 am
Thank you very much, that answers my question.
Posted on: 28th Mar, 2007 04:06 am
Larry,

This is simply done by use of "Gift of Equity". The seller gives to the buyer equity in the home using a gift-of-equity letter. It simply states that you are transacting to buy the home for $260,000 which is the fair market value but the seller, your mother, is giving you $100,000 in equity towards your purchase. The $100,000 gift of equity represents 62.5% down-payment; if you will and so you avoid private mortgage insurance etc.

good luck...this is an easy one.
Posted on: 29th Mar, 2007 11:37 am
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