How to Help Your Kids Buy a House
As Nashville housing costs rise, we have seen a major trend of parents offering assistance to their adult kids to help them purchase a home. It is becoming increasingly harder for the younger generation to buy homes – and easier for their parents to help them. Now we obviously don’t suggest this for everyone BUT if you are a parent thinking about helping this is the blog for you AND not all of these reasons include actually giving money.
So you may be asking WHY would I even consider this? Here are some of the reasons we have seen of why parents may help their kids:
- Their child can’t get approved without them. This is the NUMBER one reason.. frankly they just can’t do it without them.. and their parents understand how important building equity can be for their future.
- Their child can’t get approved for the amount of the mortgage without them… we see this a lot with high student loans that many people can afford more but their debt to income ratio just won’t allow them to. So parents can hop on the loan with them to increase their buying power.
- Why not pass along the wealth why we are still alive and can see them enjoy it? We have personally experienced this sentiment when my mother in law passed down her wedding diamond to us because she said she wanted to be around to watch me wear it..
- Their child is going to school in the area – so it just plainly is a good investment purely for the parents. They figure they are going to be paying for rent or dorm room expenses so why not invest in an area they know they can rent easily. https://nashvilleonthemarket.com/college-student-property/
- Estate/tax planning.. moving money around for tax purposes.
Now if you are thinking yes.. I am still interested but how can I help???
- Co-borrowing/Co-signing on the mortgage – this one does not necessarily involve money but it does involve risk. You are co-borrowing on a loan stating if your adult kid does not pay that you will be responsible for the payment. You do have ownership in the home as you will be on the deed. We see a lot of parents co-borrowing because their kids aren’t able to get approved or aren’t able to get approved for the amount of home they need whether that be because of debt, self-employment, etc.
- Gifting downpayment funds – Right now it is very hard for the younger generations to save up for a downpayment.. Many can afford the mortgage payments but are not able to scrape up enough for the down payment. Especially with high student loans and high rent costs many younger people are living paycheck to paycheck and are unable to save. This is where parents can chip in and can gift them the downpayment to help them get into the home so they can start racking up the equity. These days there are downpayment options as low as 3% so for many parents this is completely do-able and they are happy to help.
- Assisting with closing costs – Maybe your child has enough for the downpayment but can’t cover the closing costs on top of it.. closing costs can be thousands of dollars and kill a deal if a buyer can’t pay them.. so many parents are gifting the closing costs to help close the deal.
- Buy them a home. Yes – this one is less rare but it happens. Many times parents have the available funds to purchase the home outright for their children. We see this a lot for college students – read more about that here: https://nashvilleonthemarket.com/college-student-property/
- Help emotionally… buying a home can be stressful – help them find a trusted/knowledgable Realtor (we tend to think we are pretty good!), help them find trusted mortgage professionals, help them move, help them during negotiations, help them if repairs should pop up after the move, there are many ways you can support without money or putting any risk on yourself.
Now if you are considering this and want more info or think this may be a good idea for you – reach out to us! We love helping families make it work out for all parties! Contact us at lisa@nashvilleonthemarket.com or 615-972-6220 and we will be happy to help you make the best financial decision for you and your family!
xoxo,
Lisa Stigliano
Realtor and Co-Owner
Nashville on the Market Real Estate
Local Nashville Real Estate Professional
