I'm currently living in my grandparents old home, which is paid off. They deceased and it's in my parents name. The goal is for me to own this home, but I think lenders are trying to rip me off. The house is worth and was appraised at $160,000 and is being sold to me for $60k, resulting in a $100k gift of equity. I'm trying to get a mortgage for $60,000. Yes, the home is paid off, this is just the price the family set for me to pay. With all that equity I don't understand why banks are telling me I need a bunch of money down and also it seems like this gift of equity is really confusing things for lenders. Anyone have any advice, tips or pointers on how I can go about this with no money down and a straight loan for $60000? Thanks in advance!

The "gift" is not confusing to lenders. The "gift" doesn't count to lenders.

Lenders want you to have skin in the game. If mommie and daddy give you a house and you pay nothing for it, you have no skin in the game. The rationale is that without skin in the game, you don't have the incentive to pay the loan and are more likely to walk away from the mortgage.

You can't get a mortgage for the full amount you are paying.

But if you can't come up with the 3.5% for the downpayment, it seems like your parents are prematurely giving you the house. How would you pay for repairs?

Why get a mortgage? Make the payments directly to your parents over (say) 10 years. That is like $500 a month plus some interest - and you are not enriching a bank.

If your parents need the $60,000 now, THEY can borrow the money (against the value of the house) and you make the monthly payments, then they sign the deed over to you when the loan is paid off.

You have to remember that it's not just you with a financial stake in the home - It's the bank also that has a financial stake in the home. You know you, but the bank does not. They are taking a risk loaning you the money, and they want you to take a part of that risk also with a downpayment. This shows that you are not just buying the place to trash it and leave when the bank forecloses (neither me, nor the bank, are saying that this is your plan. But neither of us know you, and there is a risk that you might be that type of person, so they want to protect their investment in your home).

Talk to your parents about loaning you the money for the downpayment. They very likely know you (and they should) better than the bank, and know how trustworthy you are in paying them back.

It's put of the norm, confusing their established system. Perhaps getting an independent appraisal showing a value well over $60k would help. You might have to go with a more creative lender who wouldn't mind ending up with just the house and no down cash should you default.

They are not "confused" and not "ripping you off." The reduced selling price is irrelevant to lenders. YOU still need to qualify for the loan and the days of no-down loans are gone - except for VA loans a few other special situations.