It wasn't THAT long ago that we Baby Boomers worried a lot about our kids.
You know, those irrepressible Generation Y kids who were on the Internet at age 4 and who grew up clicking (my son says I grew up turning dials and that is why his generation is superior different).
Sitting on our own fat bubble- enhanced, low taxed properties, we watched prices spiral out of control here in the San Francisco Bay Area. We believed our children would either:
- Never be able to afford a house
- Move away forever
- Move back in with us (eek!)
But post meltdown, all of that has changed. And in the wake of economic disaster lies a once in a lifetime opportunity to get junior into his very own house or condo.
This is the year to help your kid become a first time buyer. You snooze, you lose.
No, I cannot promise son will become a handyman or daughter will turn into Martha Stewart. But I can promise you that everyone in the family will look back someday (sooner than you think) and thank their lucky stars you took advantage of a 24 karat golden real estate opportunity to give your child financial stability.
Why this year? Here are 3 reasons that point directly to the stars being lined up perfectly:
- Cheap properties (prices being driven down by foreclosures)
- Low fixed rates on old fashioned 30 year mortgages
- FHA financing finally has limits high enough to buy in California
As if that isn't ENOUGH, here is your amazing limited time BONUS OFFER: First Time Homebuyer Tax Credit of $8000 is good through the end of the year.
The strategy:
- GIFT your child the down minimum payment (3.5% of selling price)
- ASK the seller to pay the closing costs in your offer, so your kid needs NO cash at all
- SNAG a cheap property in the best location your kid can afford
Be prepared for this:
- MULTIPLE OFFERS on lender foreclosed properties for sale
- SELLERS insisting on an approval with a LENDER (not just a letter from the mortgage person)
- A LONGER time line than you are expecting
10 things not to worry about:
- Rates will go lower. FHA loans have the ability to be easily re-written if rates drop (streamline refinance)
- Real estate will be cheaper. So what? Think long term.
- Your kid isn't "ready". Most first time buyers do not have the perspective to understand the benefit of the tax credit, or the silver lining of economic downturns. Come to think of it, you probably weren't "ready" when he was born.
- Going on the loan with your kid. If your kid has no job now, or just can't afford to buy, you can co-sign.
- Finding the "perfect" house/condo. It is a starter house, for crying out loud. Do not expect lender foreclosures to be pretty
- FHA closing costs are "too high". Yep, FHA will have slightly higher closing costs than conventional. Seller may not pay closing costs. You can gift your kid closing costs, too.
- What if my kid loses his job? "What if's" are the biggest reason for missed opportunities!
- The real estate market is just too confusing! That is why you should find a great real estate agent
- Getting a loan is a big hassle! Get preapproved first with a great mortgage person
- Where will I get the cash to help my kid? How about an equity line or retirement account? Maybe Grandma has the money?
Get your kid set and maybe you could move in with him someday. (double eek!)
Maybe not.
Written by Janet Guilbault, Mortgage Banker/Broker Based Out of the San Francisco Bay Area
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