Helping a child buy a home can be a great joy and accomplishment.
Perhaps you want to lend a helping hand, but you are wondering about the common ways to do so. This is a brief post on three of the most common ways that you can help as a parent.
Cosigning or a joint purchase
One of the ways that you can help is by becoming a cosigner on the loan. If your income is significant, it will help your child qualify for much more than is otherwise possible. And, you can chip in for the monthly payments until they can afford the home on their own.
The drawback to this is that the home purchase is now on your credit. Inability on your child’s part to pay the mortgage would reflect on you and could put your financial future in jeopardy.
Providing gift funds
Another very common way to help your child purchase a home is by providing gift funds to your child. These funds can help with the down payment, closing costs, and more. The important thing to remember with gift funds is that there can be no expectation of repayment. This money must be a gift – not a loan.
You can give your child as much money as you’d like to purchase the home, as long as no strings are attached to that gift. You will have to provide a gift funds letter to show that you have no claim to the money.
The best way to handle gift funds is to deposit those funds with the escrow company once your child has found a home. That way, the funds are accounted for, and those funds can be easily returned to you if for some reason the deal does not go through.
Purchase and rent
The final common way some parents help a child purchase a home is to purchase it themselves, and have a child rent from them. When the child can afford the home, the home can be sold to the child in a very simple process.
If you have questions about strategies for helping your child buy a home, give me a call! I’d be happy to discuss various options and creative ways to help invest in your child’s future home. My phone number is 480-639-9640.
