Fast track to mortgage approval
Gift of equity: Some home purchasers buy houses from family or close friends for less than the market value, with the difference comprising a "gift of equity." If done correctly, the transaction can meet the lender's down payment requirement and avoid gift taxes.
Cash gifts: Home purchasers can also use cash gifts for all or part of their down payment, but the gifts must be bona fide, meaning that there can be no repayment obligation.
Increasing equity in a refinance
If you don't have enough equity to qualify for a rate-reduction refinance, or even if you qualify but want a better price, you can increase your equity by paying down the loan balance. Of course, you must have the cash to invest.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
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