Gift of Equity proposal- Has anyone done this?

[Mary lou L.]

I want to purchase my dad's house.

He talked to a lender (he went through them to buy his last home a few months ago) and this is what he said:

"Because you would be selling your home to a family member you can do something called a “Gift of Equity”. Here is how it would work…

1.You sell the home to your daughter for $100,000 purchase price.

2.Daughter gets a loan from *** for 65,000. You gift her 40,000 in equity. That means that once we close she will have a loan for $65,000 and you would have $60,000 in cash. The extra $5000 is used to pay closing costs and pre-paid items like insurance and taxes.

*** There is no money needed in the transaction except a $500 application fee. This can be put on a credit card and paid with the proceeds of $60K

*** There is no Mortgage Insurance for your daughter because her loan to value is under 80%. It is actually 65%

*** Payment would be approx. $348 for the loan. $100 for taxes. $50 insurance. Total $498/month

If you have other questions please let me know.

Thank you,"

Has anyone ever done this? I find it hard to believe its only 500.00. Will they run my credit for the loan? Or will the house still be in my dad's name? The house is free and clear.

Thank you all for your responses!!