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Question selling to family

I have a rental home that I recently put up for sale by owner. My wife's niece and husband would like to purchase it. I am wanting to sell it to them for 200,00.00 even through I know it will appraise for about 25-30 more. They were told by their loan processor that they would not be able to get 100% financing because they bare buying from a family member. My wife and I have only been married for 7 years and so I am not a blood relative to her niece. They also told them that if they rented the house for 6 months than they could get 100% financing. Is this true? by bjshamley463 from Denver, Colorado. Oct 30th 2013 Reply


Corey Seitz (Corey_Seitz)
#36 ranked lender in Colorado - 24 contributions

Hi, that could possible be true for that particular lender. We allow gift equity for the down payment, you would sell the home for $230k and gift them the $30k in equity as a down payment. Please feel free to give me a call and I can explain the details.I am a local Colorado mortgage broker and have been in the business for 14 years. Thanks, Corey 970-672-0496

Oct 30th 2013
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Natasha Wall (Natasha Wall)
#3 ranked lender in Colorado - 3 contributions

The lending rules have an "identity of interest" section that require a minimum of 15% down if the parties are related..which in this case they are. The exception to that rule is if the borrowers rent the subject property for a minium of 6 months (with proof of rental history)...then they can do minimum down payment investment guidelines. I would be happy to discuss in more detail with you if you have additional questions. You can reach me at 303-907-9813. I am here to give you straight and accurate answers to your questions :) Natasha

Oct 30th 2013
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Sean Young (SeanYoung)
#2 ranked lender in Colorado - 1,112 contributions

FHA defines an "identity of interest" as any relationship where the purchaser and seller are related. When you have an identity of interest the buyer has to put down 15%. However, you can gift her the 15% equity to solve this issue. You can reach me at 303-521-7169 to run the numbers and see if it will work for you or not. From the numbers in your question it looks like it would be very tight, but worth a look.

Oct 30th 2013
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William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,722 contributions

Either your not getting the complete story, or they need to find another loan officer.. Non-Arms length transactions are allowed.. For FHA, it's 85%.. If the property is worth $235K, and you sell it for $200K, your at 85% Loan to value... this would be acceptable with a "Gift of Equity" letter.. if the home appraised for less, then the borrower can bring cash to close to get the LTV to 85%.. or you could lower the price of the home, but in any scenario, it's completely allowed.. If you're not willing to lower the price and it doesn't appraise high enough, then you could do "Seller Financing" such as "contract for deed", "lease option", "rent to own, etc., but some sort of sale agreement.. by selling the home this way, your Niece could pay you monthly, and after 6 to 12 months, she could "Refinance" and pay off their loan with you, but renting the home for 6 months will not do anything as far as helping her get 100% financing.. .. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Oct 30th 2013
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Pete Bass (PeteBass)
#30 ranked lender in Connecticut - 476 contributions

It is dependent on the Lender- Try you local community bank or lender- theyshould have a program that allows a gift of equity.

Oct 31st 2013
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,930 contributions

There are a few ways to make this work... Gift of equity is probably the easiest if the value really is $25 - $30k higher than what you are willing to accept in your pocket. Talk to another lender - and avoid banks.

Oct 31st 2013
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Mike Silkworth (msilkw_195_870)
#31 ranked lender in Michigan - 527 contributions

First - find a new lender. If they only told you the restriction and not an alternative they are either not motivated or not well versed in options. If you believe it would appraise for $230,000, then they could finance 85% of it with a gift of equity from you. This is likely the best option. You were given correct information about them living there for 6 months to get around this 85% limitation. All of this is assuming an FHA loan, a conventional loan may be a better option. The best thing to do is sit down with an experienced lender and talk about options. If you don't know who a good lender would be, check with a Realtor that you trust - they always know the best Lenders.

Oct 31st 2013
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