Can I buy a house and use the equity as my down payment?

Q:  Can I buy a house that is worth $100,000 for $80,000 and use the $20,000 equity as my down payment or use it to pay-off some debt?

A:  The only way you can use the $20,000 equity as your down payment would be if you happened to be related to the seller and were buying the house to live in.  In that case we can structure the $20,000 equity as a gift of equity which can be used as your down payment (gifts for down payment are allowed from relatives).  As far as paying off debt with the $20,000 equity, this can be done once you own the house by taking out a home equity loan because you can't use the equity until you actually own the property.