When you buy a home for less than its fair market value (FMV), the IRS treats the discount as a gift.

: Lenders like Fannie Mae , FHA , and Freddie Mac often allow this gifted equity to count as your down payment, potentially enabling a $0 down purchase.

Buying a house from a family member below market value is a legal and common strategy, often structured as a . While it can significantly lower your upfront costs, it requires careful documentation to satisfy both the IRS and mortgage lenders. Core Concept: The "Gift of Equity"

: You must establish the FMV through a professional appraisal to determine exactly how much equity is being "gifted". Critical Tax Implications