We learn in the beginning of the movie that there was a period when Annie wasn't speaking to her mother. Here's what I think happened: Annie must have known something going on with her mother and her brother. When she got pregnant with her son Peter, she seemed determined not to let her mother set her sights on her son. At first, she tried to miscarry, but I believe she must have run away with Steve before he was born.
We also learn that Annie and her mother reconnected sometime after Peter's birth. I'm assuming there must be some kind of ritual the cult performs in utero to "promise" a body to Paimon. It's possible that Paimon was somehow "attached" to Annie's second child, Charlie, when she was born. Or maybe Charlie was born as Paimon, and that's why she was always so strange.
Since Paimon prefers a male body, the cult needed to "correct" Charlie's body to please Paimon. Which is why they did that specific set of rituals to detach Paimon from Charlie and make Peter the final offering.