10 Things California Baby Boomers Need to Know About Helping Their Kid Buy a House

Mortgage and Lending with Platinum Home Mortgage Company NMLS #238304

We baby boomers have always been a headstrong bunch of pioneers, and nothing about that is going to change until the last one of us is in our grave.

Here in California, we boomers seem to have this horrible recurring nightmare: the price of buying real estate is so high that our kids either become permanent renters or (gasp!) move to one of those "cheaper" states to raise our grand kids.

Wait. That isn't a dream. That was reality only a few years back! 

And it will be over our collective dead bodies that we let that dream become a reality again.

Not happening.

We would much rather take advantage of what we see as a golden opportunity to help our kids:

  1. Some of the very best California real estate is now dirt cheap (no pun intended).
  2. We remember rates at 17%!!! We don't EVER remember rates in the 4's.
  3. In spite of the economy taking a major dump, we still have enough equity/cash/investments/inheritance/retirement to help our kid buy a house. At least NOW we do.

But who knows how long any of the above will last?

So before things turn around again, (and they WILL turn around), consider helping your kid while you are still alive (as you secretly scheme to keep the newest generation close by...you know, the ones THEY have to take care of).

10 Things You Need to Know to Help Your Kid Buy a House in 2011

  1. You can "gift" up to 100% of the down payment and closing costs on an FHA loan (FHA requires only a 3.5% down payment).
  2. You can sell your kid your own house, or your rental house, and "gift" the equity in the house as the down payment and closing costs (money from the proceeds of the sale are transferred directly at the time of close, no need to "front" the cash).
  3. You can use your equity line to "gift" your child the funds required for the down payment.
  4. All of the gift funds need not come from one party. There can be multiple gifts from various interested parties (grandma, uncle, sister, brother, employer, etc)
  5. Closing costs can come from seller credits and/or lender credits. The down payment CANNOT be a credit from the lender or the seller.
  6. You do not need to be on the loan or on the title to to gift funds to your child.
  7. If your child cannot qualify by herself, FHA will allow you to be on the loan as a "non-occupant co-borrower".
  8. You will need to prove you have the gift funds in an account by showing a copy of the account statement. (You may not use cash from your safe unless you are willing to deposit it. Gift funds need a paper trail)
  9. You will need to sign a document stating it is a true gift and you do not expect to be repaid.  You will not need to transfer these funds until your application is approved and ready for docs.
  10. There is a saying in the lending world "You cannot sign good credit to make up for bad credit".  If you are making an application to be on the loan with your kid, your excellent credit score does not matter if your kid's score will not pass. Your mortgage person may be able to fix credit issues. Ask her.

Takeaway: There is a golden opportunity in California this year to help your child realize the dream of owning their own home. If this is one of the things on your "bucket list", start by working out the details with a local mortgage professional that will interact and work well with the communication styles of both generations. 

Best of luck, and please feel free to contact me with questions.

 Written by Janet Guilbault, Private Mortgage Banker with RPM Mortgage based out of the San Francisco Bay Area

Janet Guilbault Mortgage Lender

Comments (15)

Wendy Betts
South Delta & S. Surrey Realtor

This post is full of great information!  You could do a seminar to educate the "Boomers" to the benefits of keeping family close - and how you can help them acheive that!  Cheers - Wendy Betts - Vancouver BC

Jan 13, 2011 06:22 AM
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Janet - Wonderful post!  I actually love working with most parents who want to help their kids.  Quite often, the parents and I become even friendlier than the kids and I (as a very young boomer, I can hang with either group).  Working with kids and their parents can also open the doors to so many other family members as well as friends too.

Jan 13, 2011 06:29 AM
Ellen Wright Adams
Academy Mortgage.......We are a Equal Housing Lender - Eugene, OR
LoansByEllen- Licensed in Oregon
Janet: From one mortgage lender to another this is a GREAT post!
Jan 13, 2011 07:36 AM
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

Great information, Janet.  I am reblogging.

Jan 13, 2011 07:56 AM
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

As a baby boomer and mother of two twenty-somethings, this article has been extremely helpful and informative.

Jan 13, 2011 08:29 AM
Christa Borellini
Prudential California - San Diego, CA

Those are some great ideas on how parents can help their kids with their first home.  Very good points, especially in California where home price are still high.

Jan 13, 2011 08:33 AM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Janet - I'm so glad you wrote this comprehensive article and that I found it. I have had several boomers recently helping their kids here in CA, plus a few "kiddie condos" bought for those in college. With the ability in our are to now get a 2BR condo for under $100,000 (of course condos present their own issues around owner-occupancy, problems with late HOA fees and litigation) but it certainly is possible.

And the other issues you noted that enable parnets to help could be the only way some "kids" in our expenwive state can buy a home.

Thanks. Gonna share this with some folks I know. And look for a reblog on on of my outside non-AR blogs.


Jan 13, 2011 09:30 AM
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Janet:  Great info here ... and I'm hoping that many potential buyers and "gifters" are reading it and take action.  As you point out, it is a extremely good and increasingly viable option to consider ...


Jan 13, 2011 01:22 PM
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Hi Janet, suggesting too.  If you don't mind this blog being bi-coastal - I will reblog because the same applies to NY.  The notion that buyers have all the time in the world is hard to dispell.  Although homes are not dirt-cheap in Westchester - they are a lot cheaper than they were before the bottom fell out and with interest rates so low - affordability is at a rate not seen since the last housing recession.  But so many buyers are saying "I want MORE - and if I wait long enough, I'll get it." Total fantasy.

Jan 13, 2011 01:25 PM
Aaron Seekford
Arlington Realty, Inc. - Arlington, VA
Ranked Top 1% Nationwide 703-836-6116

That is very informative and very interesting, Janet. I believe many of these same principles can apply to other states.

Jan 14, 2011 04:25 AM
John Mosier
Realty ONE Group Mountain Desert - Prescott, AZ
Prescott's Patriot Agent 928 533-8142

Thanks for the post Janet. Things are a little different here in AZ, but there is wisdom to be applied from your post.

Jan 14, 2011 04:29 AM
Brandon & Grace Yee
Chase International - South Lake Tahoe, CA
Lake Tahoe Real Estate

Hi Janet,

Great advice.  You're right, why not take advantage of the market and help our family as well.  Nice post!!

Jan 14, 2011 04:37 AM
Tracy McPeek
Cottonwood, CA

Excellent information, thanks for taking the time to put it on "paper".

Jan 14, 2011 05:02 AM
Vince McEveety
Gilleran Griffin Realty - Sherman Oaks, CA

that is a great post

thanks for sharing it

Jan 14, 2011 05:12 AM
Kevin Kueneke
Caliber Home Loans - Encinitas, CA
San Diego Mortgage Banker

Great post Janet.  I have averaged at least one "kiddie condo" a month for the past year, sometimes a gift just isn't enough.  I am also seeing an increase in adult children helping their retiring baby boomer parents!

Jan 14, 2011 05:55 AM