With today’s economy, buying a home can be difficult. For first-time buyers who do not have a strong financial background, it may be impossible. Parents want to see their kids be successful and one of those indications of success is being a homeowner.
Help with the Down Payment
Your child may have excellent credit and a reliable income, but if they do not have cash for a down payment, they will have a hard time getting a home loan. Most banks will not extend a hundred percent credit on the cost of the house today. Requirements for the down payment vary from 3 ½ percent to 20 percent, depending on whether you get a traditional loan or an FHA loan. If you can afford to pay the down payment for your kid, they will be able to get a home loan with good credit.
Pay the Closing Costs
Another cost that requires actual cash in most situations are the closing costs. They are lower than the down payment, but can be more than your child has available. If you cannot afford to assist with the down payment, paying a portion or all of the closing costs can be a tremendous help.
Get the Loan Yourself
One option to help your child is to buy the home for them and let them make payments to you. You will probably get a better rate than your child and lower payments, which will make it easier for them to pay back the loan. One consideration to keep in mind is your ability to continue to make the payments if your child cannot pay you back. It will be your credit that will be affected by missed payments.
Become a Co-Signer
If your child can qualify for a home loan with a co-signer, you can help them without spending any money. Your child will still be responsible for the payments and it will help their credit as they make payments on time. The danger is that if they default on the loan, it will damage your credit unless you take over the payments.
While they may not always appreciate unsolicited advice, giving them information about buying a house will put them ahead of other buyers. Volunteer to go with them to look at houses and point out things they should consider. This includes things like the cost of inspection, checking the foundation, finding out the age of the roof, and other parts of buying a home that they may not think of.
Offer to go with them to a real estate agent or mortgage broker. Having an older adult present will help keep them from being taken advantage of, and you can explain things to them that they may not think to ask.
Your child can become a homeowner even in today’s housing market with a little help from you. Your knowledge and experience can be the most valuable gifts you can give to your adult child.