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Want to give a younger relative a healthy head start financially, or to keep a sentimental home in the family? Whatever the situation, buying or selling a home to a family member can be a win-win situation. Here’s a few things you should know to help the transaction go smoothly.

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Non-Arm’s Length Transaction

When the buyer and seller have an existing relationship, this is called a non-arm’s length transaction. Because of the existing relationship, there are some government and lender guidelines to follow. The IRS may keep a closer eye on non-arm’s length transactions, but if you follow the recommended guidelines your transaction should stay on track.

For example, be sure to have an inspection to protect the buyer, and hire a home appraisal agent early on so you know the fair market price of your home. This way, the buyer and the seller can come to a fair agreement on the price of the home without raising any red flags.

Gift of Equity

Giving a gift of equity, or selling your home to a family member below market value, can be a great way to help your loved ones financially. However, selling your home to a family member for a low price has its own set of rules. Most lenders allow the gift to go toward a down payment and the process requires a gift of equity letter that both the buyer and seller will sign.

When giving a gift of equity, frequently from parent to child, it’s important to keep in mind things like possibly triggering a gift tax, and potentially affecting sales of comparable homes in the area if you sell well below market value. Don’t worry, you won’t have to learn all the ins-and-outs for yourself; You can consult with a lender who knows the rules and can guide you.

With a little preparation and research, you and your family member will be exchanging keys and signing on the dotted line in no time! If you need help transferring property to a family member or giving the gift of equity, contact New American Funding – we can help.

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Posted To: MBS Commentary

Bonds were leading off in a slightly friendly direction during the overnight session, largely because we hadn't really heard from China with respect to yesterday's trade deal drama. Nonetheless, it seemed like more concrete steps were being taken, so markets were willing to move in a risk-on direction (better for stocks, worse for bonds) in general. The whole "not hearing from China" thing was validated right out of the gate with headlines suggesting China had concerns about US agricultural purchase requirements. Shortly thereafter, Trump tweeted harsh criticism for a WSJ article. Almost everyone assumed he was referring to yesterday's article that blew the lid off the trade deal agreement. With those two updates, suddenly, the deal didn't look like a sure thing and...(read more)

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Mortgage Rates Bounce After Trade Deal Update

Posted To: Mortgage Rate Watch

Mortgage rates were somewhat distressed , to say the least, after yesterday's various news stories pertaining to the US/China trade deal. For a variety of reasons, that's the biggest consideration for financial markets at the moment, and interest rates are no exception. Rates were pushed to the upper edge of their recent range as the signing of the first phase of the trade deal looked increasingly likely by the end of the week. While both sides basically acknowledged the progress on the deal (and even the probability that it will be signed), it was not, in fact, actually signed. Additionally, several details still need to be cleared up before that happens. The absence of a more concrete trade deal conclusion proved beneficial for rates. As far as underlying bond markets are concerned, much...(read more)

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