3 Ways To Help Your Child Buy A Home While On A Budget
Offering assistance when gifting a down payment might not be possible
It’s not unusual for adult children to look to their parents for help when purchasing their first home. In fact, the 2018 NAR Home Buyer and Seller Generational Trends Report shared that 23% of home buyers, 37 years and younger, who purchased their home with a down payment, used money they received from family or friends.
However, not every parent is in a position to write a big check, however much they might want to. Cheryl Milan, a Wisconsin homeowner, shares her situation. “I see some of my friends prepared to gift a significant part of the down payment, or even fully pay, for their children’s house. I can’t match that, but I still very much want to help my daughter buy her first home.”
Foremost, how do you determine if you can offer monetary assistance to your fledgling property owner? Above all, it has to make good financial sense for you. The goal is to help your child, while still protecting your own financial future. If gifting all or part of a down payment damages your personal retirement plan, or takes too much out of your your 401K – then it might not be the best choice. But fear not, there are plenty of alternative ways to support their dream of homeownership.
1. Help Them Find Resources
The good news is that most states offer first time-homebuyer programs that can help your child realize their dream of homeownership – programs that many fledgling homebuyers are often not aware of. Doing the research and then sitting down with your son or daughter to go over what your state offers can be an enormous help to an overwhelmed, first-time buyer. Nerd Wallet has a great breakdown of state-by-state, first-time homebuyer assistance.
2. Save For A Downpayment Together
Over the last few years, quite a few states have been rolling out First-Time Homebuyer programs (FTHB). For example, in Minnesota, First-time homebuyers, or buyers re-entering the market after renting, can save up to $150,000 towards a new home while accruing dividends and interest. A parent, or even a grandparent, can open and make deposits to FTHB accounts for their children and grandchildren. By setting up a home buying savings plan with your child, you can avoid the financial hit of writing a big check and contribute to their dream over time.
Currently, the following states below offer FTHB plans. Each state has unique guidelines, so be sure to investigate what your particular state offers before sitting down with your child to make a plan.
3. Consider Co-Ownership
The trend of multigenerational homebuyers continues to rise for a reason. The New York Times article, “What to Know Before Buying a Home With Your Parents” stated that “a record 64 million Americans now live in a multigenerational home, according to a Pew Research Center report, up from 32.2 million in 1950.”
While not for everyone, many find that the benefits of sharing a home with their parents outnumber the negatives. These include; sharing mortgage expenses, providing social engagement for older parents and offering live in childcare. The article interviewed Diana Limongi, a nonprofit business consultant and multigenerational homeowner, who said, “I hear my mom talking to my daughter and cracking up. It’s just pure joy, and it’s a beautiful sound. They’re really enjoying each others’ company.”
If this route sounds like it may have potential, be sure to sit down with your REALTOR® to make sure that the properties you are looking at are zoned for multi-family usage.