Buying a Family Home with a Gift of Equity (Florida)
Buying a Family Member’s Home in Florida Using a Gift of Equity: How It Works
Buying a home from a family member can be one of the most meaningful ways to become a homeowner. In some cases, the seller may offer a gift of equity, allowing you to use part of the home’s value as your down payment.
This can make homeownership possible without needing large savings upfront.
What Is a Gift of Equity?
A gift of equity occurs when a family member sells you a home for less than its current market value.
The difference between the appraised value and the purchase price becomes your equity in the home.
Example:
Appraised value: $300,000
Sale price: $270,000
Gift of equity: $30,000
That $30,000 can often be used toward your down payment, eliminating the need to come out of pocket with those funds. The other part of the equation when purchasing any home is closing costs. In the State of Florida, closing costs tend to be around 3-4% of the purchase price of the home. Structuring the contract terms appropriately can include the closing costs to be part of the transaction, thus eliminating the buyer to come out of pocket with those standard fees. This could save you thousands out dollars out of pocket, and set you up to purchase the home with very little out of pocket. Typically, inspections and the appraisal are required to be paid up front at time of ordering, so those are paid out pocket, but the remaining costs can be covered through the structure of the contract and financing.
Who Can Give a Gift of Equity?
Typically allowed between:
parents → children
grandparents → grandchildren
siblings (depending on loan program)
Most loan programs require a family relationship and a signed letter (lender specific) confirming the gift.
Loan Programs That Allow Gift of Equity
FHA loans
Conventional loans
VA loans (in certain scenarios, quite uncommon since a VA loan covers up to 100% of the purchase price)
Each program has slightly different rules, but many allow the gift to cover all or part of the down payment.
Benefits of a Gift of Equity
little to no cash needed upfront
built-in equity from day one
lower loan amount compared to market purchase
Important Requirements
Lenders will require:
a formal gift letter (provided by lender)
proof of relationship
appraisal to confirm value
standard underwriting approval
The transaction must still be handled as a legitimate sale (not just a handshake deal at the kitchen table—sadly, underwriters don’t accept vibes and good intentions unless written out in a contract).
Common Mistakes to Avoid
Check with an accountant to see if the gift giver or receiver is on the hook for paying "gift tax" to the IRS
Assuming all family relationships qualify
Skipping professional guidance or working with a lender unfamiliar with this program
Next Steps
If you’re considering purchasing a home from a family member in Florida, a gift of equity can be a powerful tool—but it must be structured correctly.
I can walk you through your options and help you create a plan that protects both you and your family.
Kristi Nowrouzi
