Hi all. I have a question hoping someone will be able to shed some light. My brother owns a duplex home and he wants to sell it to me for 80% of its total value. (Total Value= 96,800) He owes $70,000 on it at the moment. I need a loan that is going to allow me to roll the closing costs into the purchase price and use the 20% equity that will be in the property at time of purchase as the 20% downpayment. One bank reported that this can be done by writing in the mortgage that the seller is gifting the downpayment in the form of equity, but a mortgage broker I spoke to said that the only way this can be done is if the bank is not selling the mortgage off to Fannie Mae or Freddie Mac after purchase. I need my monthly payments to be $600.00 max in order for the deal to work for me. Any suggestions on what kind of loan program I should go with?
Thanks everyone!
JayDee
You’ve left a lot out…
(1) How’s your credit? If it were for me, I could get this done this afternoon and not really break a sweat (…and it’s a 102 heat index right now and climbing!)…
(2) You say “I need my monthly payments to be $600.00 max in order for the deal to work for me.” What payments? The P&I or the PITI? If you want the P&I to be under $600, you can borrow the $77.5K (80% of $96.8K) for 30 years fixed at 8.5% and still be under $600 (so there’s lots of room)…if you’re talking PITI, we need to know how much hte taxes are and how much insurance is!
(3) How does your brother KNOW that the property is valued at $96.8K? Does he have an appraisal less than 30 days old? WIll the borrower accpet it? Usually, they want an appraiser off of their list to appraise it. Their appraiser might say it’s worth $90K (or they might say it’s worth $105K)…appraisal is not an exact science and has a degree of subjectivity associated with it…
My bank will do this deal for me but I’ll take a hit on rolling the closing costs in and you might have to pay PMI…
Keith
Hi keith
Thank you for your reply. I made a mistake in my post actually. The property is worth $121,000 and 80% of THAT is $98,600.
With that said the answers to your questions are:
My credit score is 751 and my husband’s is around there as well. We would be using both of our income together to apply for the loan. I would think that is what we would need to do because of my low income.
PITI would have to be $800.00 or below. (Principle, Interest, Taxes and Insurance) Taxes are $1800.00 a year appx. and Insurance is running me around $800.00 a year.
My brother knows that last year when an appraisal was done, it came out as $121,000. So that is where that number came from.
My brother is willing to assist in any way on the profit so that any money needed can come out of the $96,000.
One bank told me that it may be able to be done if I purchased at the full value (121,000) and put a clause in there that stated the seller was gifting the 20% downpayment in the form of equity. Being that he is a blood relative, the banker said this could be done. And then the seller would assist with the closing costs.
He said that it is all in how you write up the contract.
Hope that gives you a better picture of the entire situation. There is so much red taoe when it comes to mortgages, I wish that I could just buy it with all cash. Wishful thinking. 
Maybe someday.
Thanks again,
JayDee
JayDee,
It sounds like you have an easy deal in front of you. Let me know if you need any help.
With those parameters you should not have any issues.
Make sure you shop around a bit.
Your brother cannot gift more than $11,000 without tax issues. Keep the sale price low so that you tax basis does not increase. With a sale price of $98,000 and a gift of $10,000 you will have no problems getting financing. Your looking at a 89% LTV N/O/O with 700 scores. Don’t make it too complicated, just find the best rate.
Thank you all for your posts. It has been extremely helpful. The problem that I keep running into is the no money down issue. Supposedly, if these lenders were to sell off loans to Fannie Mae or Freddie Mac, these government entities won’t accept loans where the downpayment has been gifted in the form of equity, unless it’s a family member residing with you in an owner occupied setting. My bro doesn’t live with me and this place won’t be owner occupied. But, I use the top unit as my office that I come to everyday. Do any of you know if that would constitute as being “owner occupied” in some way?
I know it sounds like an easy transaction, but there is all this red tape that keeps coming up.
Any more suggestions or solutions from any big mortgage obtaining brains out there?
try any number of nonconforming lenders in order to avoid Fannie and/or Freddie… Rates are competitive.