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3-2-1- LIFTOFF! Prevent Failure to Launch: Help Your Kid Buy A House This Year

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

Posted by Janet Guilbault California Mortgage Banker/Broker on 04/27/2009 05:25 PM

Comments (68)

First Time Home Buyers in the Mortgage / Finance Channel

first time buyer, monday musings, babyboomers, real estate loan, first time homebuyer tax credit

Originally posted at: Buying Real Estate in California? Everything You Need to Know to GET APPROVED NOW: 3-2-1- LIFTOFF! Prevent Failure to Launch: Help Your Kid Buy A House This Year

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68 Comments on 3-2-1- LIFTOFF! Prevent Failure to Launch: Help Your Kid Buy A House This Year

APR

I have a "shared equity" agreement with 5 family members. I provide the down payment and they maintain the property.

Works for me.

Lenn: Sounds like you are the Godfather, I mean Godmother of your family.

And that is a good thing.

I have helped one child buy their house. I have another no so movitvated since she makes over the $95k limit to get the tax credit. You need to make over the limit to buy in San Francisco which is why some people think the tax credit is sort of unfair to Calif.

The prices in Central Florida are perfect for the credit - you can find a nice starter home in good condition for under $150k.

Wanda: We actually have houses that cheap here too. The closer you are to the coast, the more expensive it gets. People are willing to pay a lot for foggy summers.

Great advice Janet. I do like my foggy summers just fine though, have to admit.

Too bad my daughter is only entering her sophomore year of college. And I fully expect her to be married within a few very short years. Possibly before she finishes college. Buying something for her sounds great but we certainly don't have the extra funds right now, and she's talking about being a missionary. No, I am NOT thrilled about the missionary prospects, but she certainly won't be needing a house near mom =(

There are so many great opportunities for 1st time buyers right now. A parent willing to participate is all the better.

I just wrote a post on my Ann Arbor Real Estate Talk blog and called it a perfect storm. It is if only the buyers would realize it and get off the fence and take advantage of it.

This is a great opportunity to help our children experience home ownership. Wonderful post! Thanks for sharing.

This is the message I have been trying to get out as well. Very well written. May it reach those in the know.

Parents with down payments are in demand---it's a great time to help 1st time buyers take title to a piece of the American dream.

Janet, I walked into an open house in the Marina district in 2005. It was a 3rd floor converted apartment with no elevator or garage parking. You could see the water if you leaned out far enough. The 700SF one bedroom was a total remodel. Vinyl floor in the Kitchen with non-wood cabinets, 20 year old carpet, and original bathroom. The Realtor was writing up a $675,000 offer. I just about had a heart attack. This would have been $50K in Oklahoma. I know, location, location, location. But that is when I said, the market was out of control.

Janet... a creative message for most to understand. Easily stated and yes, this is a great time to buy and parents can help. The problem that I see is that so many people get hung up on rate and the condition of the property. There is never perfection in any house, even if it's new construction.

On another note, just a fyi... you might want to revist number 6. I have written about this many of times. thanks

jeff belonger

Absolutly Janet! I thank my lucky stars for parents like you. My own parents are planning on doing exactly this, for me.

I believed if I was trying to get young people to buy homes I should encourage my 22 year old to buy one. He is the proud owner of a small school house turned home and he is loving it. I wanted people to know I believed in what I was preaching.

Janet....great post and well written. I have several years to go before my kids reach that point but we are planning to help with the downpayment and they have been talking about homes since they were in very young.....they hear "real estate" around the clock I guess.

Hi Janet -- What a great roadmap to follow. I hope they write this up in your local paper as it is so well written.

Great post. We are taking advantage for our kids.

Chris is right 0 that's a great road map. My 24 year old has been looking to buy, until she moved into our rental, which is nicer than what she can afford. so she and her roomies are happy. But before the federal tax credit ig=s gone, she'll be in her own home. Funny thing is, she has more money saved than me!

This is an excellent post for first time buyers and parents.

What a great post, I had to read it several times. When my nephew went to college in 2000 my sister and I bought a home for him and had him manage it. When he gratuated in 05 he sold it and paid us back along with almost all his expenses. He rent the rooms out to friends and collected the rent.

For every crisis there is always an opportunity. I don't think we are at a bottom yet for home prices but California is certainly closer to the bottom than the top, it is one of the few markets that is improving.

The what ifs are really fading away with the market turning around in a lot of areas right now.

Fantastic post -- I honestly believe that they will be thanking their parents in 2 to 4 years. Many markets are already seeing modest improvements.

My son bought last June. We did get him refinanced last month. This year's tax credit is just phenomenal. Have a friend's son who appears to be letting the opportunity pass.

Richard

Janet - Very good info for parents to know. I currently am working with two different sets of FHA clients who are getting help from their parents. Cost aren't all that different than conventional loan programs. While FHA borrowers are allowed to finance their UPMIP, the MMI is actually lower than conventional PMI and the LO fee is restricted to 1%, which is also generally lower than conventional LO fees.

I've bought a few properties with family members and it has worked out pretty well. No kids yet, so we'll see what happens with my nieces and nephews. Thanks for the information!

YES. this is the time for people to concider purchasing Real Estate.. Tax Credit, Lower Interest Rates....Allgood reasons.

Great post Janet. I agree. I managed to get my first down payment from my great uncle. I was able to buy my first house at 19! I plan on providing the down for my children, as well.

Thank you for laying it all out so clearly.

Best wishes, Sandy

Yes, it's a terrific time for first-time-homebuyers all over the country. When I bought my first home the interest rates were 16%...some of you will remember when exactly that was...younger people can't even fathom why anyone would buy a home with 16% interest. So, I have to laugh when I hear people worrying about interest rates these days. With the prices lower than they've been in a long time, interest rates that make it cheap to borrow and the tax credit...it's a no-brainer. Thanks for your post.

Janet,

Great post.

My daughter is already a homeowner so considering buying for my granddaughter. Hopefully in 5 years (she will be college bound) an hopefully a little equity to get her started in life.

Regarding 7. What if my kid loses his job? I wrote a post on this a few weeks ago - in California, California Association of Realtors has a program that will pay your mortgage, up to $1500 for 6 months if you lose your job with certain caveats, of course.

this is such a good suggestion and such a great marketing piece! Way to go!

A great idea. I need to try to market it.

It is a wonderful time for many first time home buyers. But, every first time buyer may not be ready for homeownership. Personally, I believe every buyer(yes, even my kids) should have 'skin in the game'. I also feel it is unwise to cosign in many/most situations. No down payment & questionable credit - isn't that what stated loan were all about?

APR

Great article!

In some areas, the monthly mortgage amount might be even less than rent.

My daughter who lives in the St. Louis, MO took advantage of the credit last year & is enjoying being a first-time homeowner!

She is using her tax-credit to partially pay for her wedding this August

Aloha,

One of my buyers did that for one of his sons. He found an amazing deal. Aloha, Lana

Great message, and a marketing plan that many Realtors should capitalize on!

My two young daughters (7 & 9) are not old enough to buy a house yet, but they spend a lot of time with me looking at investment property, watching my construction crews, and asking me a lot of questions. It is awesome family time, and I hope that they are learning a lot about real estate!

Have a Profitable Day Everyone!

- Harrison

Janet ... Thanks for this good article and encouragement for those among us to practice what we preach and get young people involved in the first time home buying process. Now is indeed the time when the four factors line up in a the best way possible: cheap properties and prices stabilizing, more foreclosures on the market, low rates on 30 year fixed loans, FHA financing with higher limits, and first time homebuyer tax credit of $8,000.

Best wishes to you at the Bay area.

I bought my first home 30 years ago at age 17. I need to learn more about loan programs available for children under 18 since I would love to help each of my kids buy a home this year to take advantage of the market pricing and incentives!

Jim

Janet - Great post and you are right on target as always! Thanks and hope everybody uses this great selling tool.

Your message is exactly what I preach! Just closed on a house for my 19 year old. HUD, $100 down payment. Our area typically doesn't have homes under $100,000 and the former owners who lost this home were good enough people not to destroy it on the way out. So he got a great little 2 bedroom house with garage for $175 per month for 15 years. He was paying $475 rent!!! He is in heaven. He can live here the rest of his life CHEAP or in a few years, cash in on the wonderful equity and move on up!!! I'm having the time of my life in this market!

I am available for adoption. ;-)

I found out that the $8000 tax credit can be in the buyer's hands shortly after close. How? The buyer can refile their 2008 tax returns and receive the credit quickly. They don't have to wait until 2010 to get the refund. With that $8000 in their pocket, they can pay you back, or buy a new roof, new windows, new carpet, or some decent furniture for this home.

Yes, there are lots of affordable opportunities out there to take advantage of .

Patricia Aulson/Portsmouth NH Real Estate

Thank goodness I saw this blog! Going through this right now with my 2 sons. Older one is currently unemployed and we have been wracking our brains about getting him a house - I mistakenly, ugh, I even hate to say it, asumed if we co-signed on the loan with him he would not qualify for the $8000 (does he?). He actually has money of his own. Just no job at the moment.

And our youngest and his girlfriend are shopping for a home now too.

Thanks for the great blog. Timing could not have been more perfect! I am sending it to both of them.

I have been touting this to allof my friends, SOI and associates. The only concern is if the child can maintain the payments for three years. Agents in college towns should be especially aware of this as many parents are purchasing condos for their kids to live in during college. this would aid them tremendously.

that is a great post. And so true. I feel like I am working with a lot of First time homebuyers lately...and it is great!

Janet - very nice post. I took out some buyers doing the same this past week. There really are a lot of first time buyers, as there are some very good opportunities out there right now.

So does this also mean that all of those Californians who came here to Indianapolis to buy a home will now be able to? Are their homes in California now selling? Amazing how far reaching some shock waves can be!

To both Donne Knudson and Jeff Belonger, 2 of my esteemed fellow loan officers here on ActiveRain (and to my Realtor readers as well!) I welcome links to posts you have written on the same subject. Please don't hesitate to stir the pot or enrich the discussion by directing us to a more in depth discussion of one of the points made here.

PS No one knows and understands FHA better than Jeff.

To Paul P. comment # 36 (Wow....no one else jumped on this?????)

You said: No down payment & questionable credit - isn't that what stated loan were all about?

I am going to admit that not every kid is ready for home ownership. But I am going to disagree that FHA is anything like a stated income loan. FHA is not subprime. There is a criteria for credit, and a criteria for income that must be met to qualify. INCOME MUST BE PROVEN.

Gift funds must come from a family member. So a parent must take some responsiblity in determining if the kid can handle being a homeowner and making the payments before gifting the downpayment.

As for skin in the game: It would be better, I agree. But I think taking advantage of this opportunity trumps the risk of waiting until the kid saves up the money, rates are higher, prices are higher, loan limits lower, etc

Mark comment # 23: You wrote:

I don't think we are at a bottom yet for home prices but California is certainly closer to the bottom than the top, it is one of the few markets that is improving.

Met with some kids yesterday to do a streamline refinance on their FHA I did last fall. The Dad was with them because he lived on the same block and needed to talk to me about a refinance.

Dad owed $270,000 on his house....the same floor plan as his kid's house. He had paid over $400k. The value? About the same as the house his son bought last fall: $175,000.

The moral of this story? There is still people in very bad situations as a result of the meltdown. But at least the sun is shining brightly on first time homebuyers.....the son feels strongly he "bought at the bottom". The Dad was wondering how to "modify".....

My oldest kids only 12. He just wants his own room. Seriously, my wife and I have a dream of buying rental property and owning a home for each of our kids.

I know I know! I have been trying to get my daughter to see the light. It kills me because I work with first time home buyers a lot but I can't get her out of her "we like our rental and we don't want to be tied down" mindset. Both she and her husband have owned homes before but at least 5 years ago! They are perfect for this! And he has a degree in economics! Go figure!

Excellent advice! We should encourage our kids to invest in real estate. Mine is going on 12 and he is already understanding why it is important to be a property owner! Raise em right! :o)

We're looking to do this very thing with our 22 year old son.

Great advice as always....I was getting my son to buy then he decidedto join the service and he will be out of the country for several years, and he does not want tenants right now.....

Bettina

Janet - Thx for the compliment. Your so kind and the feeling is absolutely mutual. I just wanted to let your readers know that the myth that FHA loans cost more than conventional loans is not necessarily true. While there is the UFMIP that FHA requires, they also allow the borrower to finance it, which keeps the settlement costs down.

Furthermore, one of the advantages of an FHA loan is the MMI. As I mentioned, FHA MMI is much more affordable than conventional PMI. I challenge anyone to compare an FHA loan to a conventional loan and prove that FHA is not the more affordable loan option for anyone, not just first time buyers.

Now if we can just dispel the myth that FHA appraisals are more stringent than conventional appraisals. For the record Realtors and consumers reading this post now:

FHA loans are not subjected to the new HVCC appraisal rules that conventional loans are.

Janet...

We have every intention of helping. I certainly don't want him, his wife and four Grandkids living with me. I don't think my heart could take the abuse :)

TLW...ROAR!

Great post, My dad helped me get started with my first house about ten years ago and there wasnt this many good reasons to buy then.

Rock on! Not a huge reblogger but this one is definitely deserving to get in front of my crowd! Cheers and thanks!

APR

That is GREAT advice! I have been nudging my daughter to buy this year, if for no other reason than to get the $8000 tax creadit. That opened her eyes a bit!!

This is a great idea for all parents. I especially liked your 10 things not to worry about. I've heard all of those worries---some from my own kids. This opportunity may not come around again in our lifetime.

Great post, Janet. My number one complaint is that it seems that most first time home buyers in my area do not have 3.5% to put down. If more parents/relatives stepped up to the plate, there would definitely be more homebuyers.

APR

Janet: Great post. We'll definetly find a way to market using this. Thanks.

MAY

Janet - This is another great approach to explain to the consumer for first time home buyers. Thank you for sharing.

We bought our daughter a 2bed 1bath condo in San Jose, just 3 miles from our house for $150K!!! 2 years ago, these were selling for 400,000! We thought for sure they would either be renting from some slumlord, or living 100 miles away! WOW, we are so happy to have taken advantage of these times... Next though, buy a second one as purely a rental!?!

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