That's right, not only can parents help their children by getting them started with a home, but they could benefit as well. Remember, real estate is still one of the best investments you can make. Yes, even with the market as it is. Maybe more so now when there are bargains galore with foreclosures and short sales priced to sell. Before the market fully recovers, take the time to have an agent identify what's out there for you. When you decide that it would be a worthwhile endeavor, hire a Buyer's Agent to represent you and your best interests (most times at no cost to you), and have them help you find your next investment opportunity, or home.
The Federal Housing Administration - FHA loan program offered through many lenders, offers some features that can make this scenario a win-win for each party, parent and child. Adult children, please know that I am using the word "child" universally.
Parents and children can take advantage of these 5 benefits:
- Traditional low FHA down payment of 3.5%
- Child owns home while building credit, and/or while getting started in their careers
- Child also takes title as one one of the homeowners, parents may get tax benefits
- Historically low interest rates and manageable monthly payments
- Loan underwriting terms that offer pre-approval opportunites for a wide array of buyers
The local lender that I refer my clients to always has a suggestion for ways to make homeownership the best possible situation for those who qualify. If there's a way to benefit the buyer, and make the transaction safe and smart, he'll find it. He suggested this as a way to help more potential buyers realize their American Dream, and to take advantage of the buyer's market that we are in now. Please be sure to talk with a reputable lender that you trust, and get pre-approved (with a written pre-approval letter and an estimate of your closing costs and fees) before you start looking at homes with your Buyer's Agent. Most lenders do not charge an up front fee for pre-approvals. It's always wise to find out what your options are early in the process, and what the terms of the loan are first. We have historically low interest rates (under 5% these days!), and with home prices still on the rebound and in many cases priced lower than they have been for years, there is a chance that you can find a really nice property at a great price with a payment that is extremely affordable. In this scenario, it can be a win-win for parents and their adult children. It is important to note that there must be an agreement, and trust that all payments will be made in a timely manner to preserve the credit of BOTH parties. Sometimes, one 30 day late mortgage payment can have a negative impact on a consumer for a long time. Please remember that the goal is to build a happy family interested in helping one another while they preserve their good family relationship for the long term. Important personal side note.
Be sure to talk to a qualified tax advisor/accountant to determine tax and financial implications for both buyers once you find that your lender is able to help you make this type of loan. Good luck on this great investment opportunity and venture into homeownership!
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