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Old 03-12-2010, 10:50 AM
 
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I'm buying a home from my mom, part of this will be a traditional mortgage and the rest will be a gift of equity from her. This is for sale by owner and it's simple enough to fill out the sales contract ourselves, except I cannot figure out which line I should use to enter the Gift of Equity. For example the California Association of Realtors form has lines for 2A. Initial Deposit, 2B. Increased Deposit, 2C. First Loan in the Amount of, 2D. Additional Financing Terms.
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Old 03-12-2010, 01:41 PM
 
Location: Austin
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In Texas, the seller cannot give any money to the buyer for down payment, only closing costs. You need to check to see what you're trying to do is legal or if you need to have two separate agreements, one completely separate from the purchase of the property.
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Old 03-12-2010, 01:59 PM
 
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Quote:
Originally Posted by FalconheadWest View Post
In Texas, the seller cannot give any money to the buyer for down payment, only closing costs. You need to check to see what you're trying to do is legal or if you need to have two separate agreements, one completely separate from the purchase of the property.
OP is getting a gift of equity. I know TX has some wacky home financing laws, but I am sure a gift of equity is allowed from a family member.
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Old 03-12-2010, 02:00 PM
 
3,332 posts, read 7,386,818 times
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Originally Posted by fpbear View Post
I'm buying a home from my mom, part of this will be a traditional mortgage and the rest will be a gift of equity from her. This is for sale by owner and it's simple enough to fill out the sales contract ourselves, except I cannot figure out which line I should use to enter the Gift of Equity. For example the California Association of Realtors form has lines for 2A. Initial Deposit, 2B. Increased Deposit, 2C. First Loan in the Amount of, 2D. Additional Financing Terms.
Wherever your state enters info for seller concessions (i.e. seller paid closing costs), you should be able to enter your gift of equity info.
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Old 03-12-2010, 02:18 PM
 
72 posts, read 255,613 times
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Originally Posted by FalconheadWest View Post
In Texas, the seller cannot give any money to the buyer for down payment, only closing costs. You need to check to see what you're trying to do is legal or if you need to have two separate agreements, one completely separate from the purchase of the property.
What I'm describing is completely legal throughout the US, and what you are describing in Texas is something different. We got the advice from our real estate attorney / CPA plus I cross-checked it with IRS info. We should be able to enter everything on the same form. Just not sure which line.
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Old 03-12-2010, 02:33 PM
 
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Originally Posted by TimtheGuy View Post
Wherever your state enters info for seller concessions (i.e. seller paid closing costs), you should be able to enter your gift of equity info.
Thanks Tim! So as far as the C.A.R. form (PDF link below) which line would it be on this form?

http://filelibrary.myaasite.com/Content/2/2822/7943294.pdf (broken link)
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Old 03-12-2010, 02:36 PM
Status: "Bernie. Sanders 2016" (set 9 hours ago)
 
Location: Mountain Ranch, CA The heart of Calaveras County
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Curious as to where you got the CAR Forms in the first place. (Ahhh you and I posted almost the same time) We pay quite dearly to have those forms for our use. Your link shows a severely outdated form. It's been revised 5 times since the 2002 revision you're working on.

Is her gift designed to help you qualify for the loan? Basically you're getting an increased deposit from your mother (instead of your own funds) which would have to be indicated by a gift letter from her for your lender to be happy.
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Old 03-12-2010, 02:46 PM
 
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Originally Posted by DMenscha View Post
Curious as to where you got the CAR Forms in the first place. We pay quite dearly to have those forms for our use. Your link shows a severely outdated form. It's been revised 5 times since the 2002 revision your working on.

Is her gift designed to help you qualify for the loan? Basically you're getting an increased deposit from your mother (instead of your own funds) which would have to be indicated by a gift letter from her for your lender to be happy.
I got the latest CAR form from my escrow agent. I can also use a generic form from my NOLO book "For sale by owner in California" if that would better/simpler. The gift isn't designed to help me qualify for the loan, it is just doing the proper accounting because the home is worth twice as much as the mortgage I'm taking out. But it does turn out that the gift helps me have that amount of instant equity that counts toward as the down payment and is great for the LTV. We would prepare a gift letter, but still not sure which line to fill out on the form, whether it is the CAR form from the escrow or a generic form.
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Old 03-12-2010, 03:05 PM
 
Location: Boise, ID
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Could you just lower the purchase price? Or is the Gift of Equity part of your down payment to help avoid PMI? Either way, I have no idea where it would go on a California form, so I'm really no help, just curious.

I thought it was interesting that you are using actual state Real Estate forms too. In Idaho, RE agents get in big trouble for giving them out to the general public, and escrow officers don't have access to blank ones. Maybe its because they gave you an old version that it is ok.
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Old 03-12-2010, 03:12 PM
 
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Originally Posted by Lacerta View Post
Could you just lower the purchase price? Or is the Gift of Equity part of your down payment to help avoid PMI? Either way, I have no idea where it would go on a California form, so I'm really no help, just curious.

I thought it was interesting that you are using actual state Real Estate forms too. In Idaho, RE agents get in big trouble for giving them out to the general public, and escrow officers don't have access to blank ones. Maybe its because they gave you an old version that it is ok.
The Gift of Equity is an important part of the transaction to both properly reflect the IRS accounting of this sale which 1/2 below market value, and also has a lot of benefits for me as well (no down payment, good LTV).

I don't know what the rules are about using the CAR form that my escrow agent gave to me. I could also use the generic form. I don't want this to turn into a discussion about use of the CAR form because I could easily use a different one. In my eyes there is nothing special about the CAR form for this very simple purchase agreement within the family, maybe I will use the generic one that has equivalent sections. I just wish one person had the answer about where the lender is expecting the Gift of Equity to be written. Tim's answer was close but I'm trying to get an idea exactly which line, where this would go on the example CAR form.
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