Are you a parent with adult children? If so, you may not be aware that there are ways that you can help them buy their first home. With the higher interest rates for mortgages and the price of homes, things can be difficult for first time buyers. Here we are in 2023, and there are many parents helping adult children buy a home.
If you are considering this, there are ways to help your own kids step onto the property ladder. All of these suggestions are allowed by mortgage lenders.
So here are some suggestions for you to consider.
Gift money toward a down payment. If your own financial house is in order, you may be in a position to help your child take their first step on becoming a homeowner. Some loan types allow the whole down payment to be gifted, while others require the buyer to put down a percentage of their own funds. Anyone related by blood, marriage, adoption, or legal guardianship can offer gift money.
Cosign the mortgage. Make sure you understand the risks beforehand, but cosigning could help them qualify for a better mortgage rate. All parties should know the implications of cosign of a mortgage.
Loan them the money yourself. If you’re in a position to do so, you could charge them a lower interest rate than a bank. However, make sure you understand the tax implications. Consider a 5 year balloon note, and in 5 years they can qualify for a mortgage with a lender and you will be paid back in full.
Before you get started, you should consult with your tax professional and/or legal professional for advice. Then sit down and have a family discussion. Owning a home is so much better than renting. And I am sure you will agree that owning real estate is one the best ways to start building financial security and personal wealth.
There are many parents helping adult children buy a home! Of course I strongly suggest that you find a great Realtor and a good lender. I always want my clients to start a strong path to your adult kids becoming homeowners! Please call me with any questions.