Gift of Equity For a Kentucky Home Mortgage Loan for FHA
The gift of equity guidance doesn't address paying off debt so it will be up to the DE underwriter to make the decision, but keep in mind that this may be considered an inducement to purchase since there is no exception listed for family members.
What seller contributions are considered inducements to purchase?
Inducements to Purchase are treated the same way for both TOTAL and Manual underwriting. Inducements to Purchase refer to certain expenses paid by the seller and/or another Interested Party on behalf of the Borrower and result in a dollar-for-dollar reduction to the Adjusted Value of the property before applying the appropriate Loan-to-Value (LTV) percentage. These inducements include, but are not limited to:
• contributions exceeding 6 percent of the Purchase Price;
• contributions exceeding the origination fees, other closing costs, prepaid items and discount points;
• decorating allowances;
• repair allowances;
• excess rent credit;
• moving costs;
• paying off consumer debt;
• Personal Property;
• sales commission on the Borrower’s present residence; and
• below-market rent, except for Borrowers who meet the Identity-of-Interest exception for Family Members.
(1) Personal Property
Replacement of existing Personal Property items listed below are not considered an inducement to purchase, provided the replacement is made prior to settlement and no cash allowance is given to the Borrower. The inclusion of the items below in the sales agreement is also not considered an inducement to purchase if inclusion of the item is customary for the area:
• window treatment
• other items determined appropriate by the Homeownership Center (HOC)
(2) Sales Commission
An inducement to purchase exists when the seller and/or Interested Party agrees to pay any portion of the Borrower’s sales commission on the sale of the Borrower’s present residence. An inducement to purchase also exists when a Borrower is not paying a real estate commission on the sale of their present residence, and the same real estate broker or agent is involved in both transactions, and the seller is paying a real estate commission on the property being purchased by the Borrower that exceeds what is typical for the area.
(3) Rent Below Fair Market
Rent may be an inducement to purchase when the sales agreement reveals that the Borrower has been living in the property rent-free or has an agreement to occupy the property at a rental amount considerably below fair market rent. Rent below fair market is not considered an inducement to purchase when a builder fails to deliver a property at an agreed-upon time, and permits the Borrower to occupy an existing or other unit for less than market rent until construction is complete.
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I specialize in Kentucky FHA, VA ,USDA, KHC, Conventional and Jumbo mortgage loans. I am based out of Louisville Kentucky. For the first time buyer with little money down, we offer Kentucky Housing or KHC loans with down payment assistance.
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NMLS# 57916 http://www.nmlsconsumeraccess.org/
Joel Lobb Senior Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
phone: (502) 905-3708
Fax: (502) 327-9119
Company ID #1364 | MB73346E
EQUAL HOUSING LENDER