The Equity loan or LOC may seem less stressful but it will probably have a higher rate.
I would seriously consider the FHA with the gift of equity. You would probably qualify with your scores because your down payment will be so high. You can easily work the numbers so 1) you have no out of pocket expenses 2) your parents will not have to pay anything 3) your loan amount may be a bit higher to cover the amount of closing costs 4) You can either go with the 15 year loan or a 30 year and make higher payments to pay it off in 17 years as planned.
You need to consult a tax advisor and find a good loan officer who understands how to structure the numbers. I think this would be a pretty easy loan to get done if structured correctly.
Also, double check on giving the gift individually to you and your spouse and separately from each parent. I think that may be a way around the gift and taxes.
Another thing, besides the possible higher rate, when the deed changes names the lender has the right to call a loan due and payable. I wouldn't necessarily look for the easist way as much as I would look at the best and most legal way.
@mt2va wrote:I guess my wording was a poor choice. But if you go back & read my earlier posts a loan is not feasible because #1 I have no down payment, #2 I could not qualify credit wise pulling all 3 bureaus, #3 they won't do a loan for $33,000, etc
I know in most instances on here people are told if they can't do this then its not time for a home yet but our situation is a little different. We are already able to afford the house note, insurance, taxes, etc as we have been paying them ourselves for 13 years now.
I know the interest rate will be higher but that is due to my credit issues. I don't think we are trying to do anything that is illegal. The bank itself called and told me this option as well as at least one other poster on this thread mentioned the same idea.
Your down payment is the gift of equity. Because of the amount of equity you/your parents have I really think you could get an approval with FHA thru DU or LP. Your hurdle is finding a lender that will do the loan amount. Have you tried going directly to a mortgage lender instead of a bank? You need to consult a tax advisor and find a loan officer who knows how to structure this. I really don't think it will be as difficult as what you are thinking.
I can't remember exactly what you said the value was but just as an example of $84,000...then you both receive gifts of equity from your parents totaling $44000. Your loan amount would be $40000. This would include your closing costs and the payoff of the current mortgage. Your loan to value would only be 48%. Based on that I really think it would be approved thru automated underwriting. As far as the gift, with a little research on the IRS website you can probably find your answer. I'm sure if you look you can find a lender who will do that loan amount. A little more research could possibly save you money in the long run.
