How to Help Your Adult Child Buy Their First Home

Is it time for your children to leave the nest? You knew it had to come sooner or later.

Often, our children need a little leg up in buying their first home, especially with today’s staggering student loan debt and higher real estate prices.

In fact, today’s Millennials are receiving more help than ever from adult relatives when it comes to making their first home purchase. Even you’re not able to help your child buy a home outright, you can still help financially and emotionally with the home buying process. From helping them establish good credit to teaching them about mortgage options, here are a few ways you can help your child buy a home when they’re ready.

3 Ways To Help Your Child Buy Their First Home

1. Either help them with the down payment or let your child live with you temporarily. If a hefty percentage of your child’s paycheck goes towards rent, then you can bet it’s going to take a while for them to save up for that down payment.
2. To expedite the money-saving process, there are a couple of options: (1) help them with a down payment or (2) letting them live with you temporarily so they can save up. Not only will this relieve them of the financial burden of monthly rental payments, but it will also give them time to get any financial problems in order before applying for the mortgage.
3. Help your child build a healthy credit history early on. Helping your child establish good credit early on will do wonders when it’s time to apply for a mortgage. As you may know, without good credit, a bank will be much less likely to loan your child money for a home.
4. Factors that affect your child’s credit score include: credit card payment history, the length of time your child has had a credit card account open, the number of inquiries when applying for credit, and how often credit cards are used. Here are some tips from Experian on how to improve your credit score.
5. Become a co-signer or co-borrower. Keep in mind, this option is risky for you. If it’s highly questionable that your child will work hard to make mortgage payments on time, I don’t recommend this option. However, if your child is good with money management and does everything possible to make payments on time, this may be a good option for you.
6. One option for parents is to apply for the mortgage with the child as either a co-borrower or co-signer. This may increase the chances that the child will be approved for a mortgage. Keep in mind, that while similar, co-borrowers and co-signers aren’t one in the same. If the parents are co-borrowers, they apply for the loan with the child and share mortgage payment responsibilities. Co-signers, on the other hand, only have to repay the loan if the child defaults on a payment and/or isn’t able to pay the rest of the loan.

Other Options to Help Your Child Buy Their First Home

If you’re not able or willing to contribute financially, there are other ways to assist your adult child with making their first home purchase. One way you can support their home buying dream is by simply educating them about the home buying process.

If you’ve purchased a home at some point in your life, then chances are you have a fairly good understanding of how the home buying process works. Teaching your child about finances, savings and the importance of good credit at a young age will set them up for success down the road. When they are ready to purchase a home, we recommend educating them about different mortgage options. Speak to your lender about various home-buying options.

A second indirect way you can help your child buy a home is by finding them a trustworthy and experienced Realtor. After all, first-time home buyers need all the help they can get. Not only is a good Realtor able to handle all legalities and paperwork, but they should also be able to help your child understand the financial jargon that comes with making a real estate purchase. If you have questions about real estate, please feel free to connect with me and ask away!