Buying a home from my parents using a gift of equity as down and to cover closing costs. Locked into a 15 year 3.375 interest rate with 1.25 points. Sale price= $300,000 Appraised Value= $417,000. GOE= $117,000
The idea was to use the GOE as a down payment and for closing costs. Bank wanted to do $100,000 down and $10,000 for closing including 1.25 points.
Here’s the thing, they set the sales price for $200,000 as if the GOE were an actual cash down payment on the $300,000 sales price. So all of the numbers were for the $200K loan. I saw the discrepancy and asked the loan agent how my parents were going to be paid the $300K when the loan amount was $200K. The agent told me that a different agent more familiar with GOE would explain when we got closer to the closing date. That’s didn’t sound like the smartest way to proceed with a loan, so I asked the managing agent the same question. She told me the same thing and not to worry.
The only rationale that I could come up with was that somehow the bank was taking the risk of the market dropping and covering the extra $100K because the house appraised at $117,000 over the $300,000 sales price and they were confident the equity was there if they had to foreclose for whatever reason. Sounded pretty risky and unbank ish to me but that was what the agents were giving me to work with.
We go on and somehow get through underwriting with the wrong sales price and nobody says a word. Finally, the independent title company agent called me (because she couldn’t get a response from the bank) to ask if I intended to pay my parents $200K on the $300K sales price and also receive the $117,000 equity. I told her no and she said that I needed to speak with the bank. So I did and now the bank wants to set the sales price at $410,000 when I’m actually buying the house for $300,000. I had to change the 15 year loan that I thought I could afford (because we were using the $200,000 sales price) to a 30 year higher rate loan with additional costs to close.
That said, that was the correct amount and I’m not complaining about having to pay the actual sales price on the loan. My concern is that with the $400,000 sales price, won’t that increase my property taxes significantly?
Does the GOE down payment have to increase the sales price or could this loan be written for $300,000? I’m sorry that was a long explanation. Thank you for your help.
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source https://www.reddit.com/r/RealEstate/comments/udp7kl/question_about_gift_of_equity/
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