Parents Helping WIth Kids’ Home Purchases

The trendspotters are out in force, noting that the tight mortgage market is prompting kids to get financial help from Mom and Dad, in order to take advantage of low real estate prices and buy their first home.

Some wannabe buyers are asking their parents to cosign onto a bank loan, as described in Shandra Martinez’s article in the Grand Rapids Press, “More parents helping their grown kids buy first homes by co-signing mortgage loan or providing financing.” But that has some downsides for the parents’ credit rating — they’ll be viewed as, in effect, having taken on more debt, and their credit will suffer if the buyer defaults. Learn more in Nolo’s Q&A, “Should we cosign for our son’s mortgage?

Other buyers are going straight to the “Bank of Mom and Dad,” as described in Sandra Block’s article in USA TODAY, “More parents finance their kids’ mortgages.” That has the advantage of keeping all the interest income within the family, as further described in Nolo’s article, “Borrowing From Family and Friends” (which also offers tips on preparing the paperwork).