VA Gift of Equity Purchase

Buying a Home with Help from a Family Member (Downpayment)

 

An VA Gift of Equity Loan is a home financing option that allows buyers to purchase a property with the help of a seller's equity contribution. This is common in family transactions, where a relative sells a home to a buyer at a discounted price and provides the difference as a gift of equity.

This gift can be applied toward the FHA-required 3.5% down payment, reducing the buyer's upfront costs.

VA loans, backed by the Veterans Administration, have flexible credit requirements, making homeownership more accessible. To use a gift of equity, both the buyer and seller must document the transaction properly. The seller must provide a signed gift letter confirming that the funds are not a loan and do not require repayment. Additionally, an appraisal must confirm the home's value.

Some of these features include:

  • Reduced Upfront Costs - No need for cash savings, as the gifted equity counts toward the purchase price

  • Higher Debt-to-Income Ratios Allowed - More flexibility for borrowers with existing debt

  • Gifts can be used as the down payment

  • No Income Limits

  • Lower Interest Rates - VA loans typically offer competitive interest rates

  • 'Home Path Ready Buy Programs' - to purchase previously foreclosed homes

  • Energy-efficient mortgage - Borrowers can combine the cost of energy-efficient upgrades into their VA Loan upfront

  • VA 203k Loans - lets you purchase a 'Fixer-Upper' home and borrow the money you may need up-front to pay for home improvement projects

 

The important step in purchasing a new home is to get an VA Pre-Approval Letter for a home loan. The peace of mind that comes with knowing that your mortgage loan has been approved will allow you to shop for your new home with confidence. And when you are ready to make an offer, the fact that you have already been pre-approved for your loan amount will give the seller confidence in you as a buyer.

VA First Time Home Buyer Application