Smart Borrower Blog

Parents Helping Kids Get Mortgage Loans

Dec 28th, 2011 @ 3:10 PM by Amber Nelson

In these days of economic uncertainty, many potential homebuyers are asking their parents for help.

Today buyers are facing the most stringent lending standards in decades as well as a shaky job market. They are often in need of a good chunk of change in order to qualify for a home purchase. According to a survey from Better Homes and Garden Real Estate as reported in a CNN Money article , one in five baby boomer couples have already helped at least one of their children buy a house. That help has come in the form of giving cash for a down payment, co-signing a loan, or even financing the entire purchase.

That same survey found that 68 percent of parents expect to “provide financial support to their children or grandchildren in the future” to help get them into a home.

Even though home prices have now sunk back to pre-housing bubble levels (and much lower in some harder-hit states) and interest rates are at record lows, mortgage loan requirements are much higher than they have been in years. High down payment standards are very prohibitive for younger borrowers with less cash.

What’s more, mortgage lenders are looking for a stable employment history, not just a compilation of freelance and part-time jobs that many younger buyers are now able to find. Having parents co-sign is one way to get past these obstacles.

There are a few things parents should consider, however, before jumping into a financial arrangement with their grown children.

“The first rule of thumb is that parents should never get financially involved with their adult offspring unless they are adequately prepared to address their own needs and pending retirement, which may not be far down the road,” says Guy Penn, principal and founder of G.M. Penn Wealth Management in O’Fallon, MO as quoted in a MSN article.

After figuring out their own ability to contribute, parents should then make sure they are giving for the right reasons.

“If the kids can’t get a loan on their own, the parents really need to know why not,” said Jeffrey Ivory, a partner with Stonebridge Financial Partners in Bingham Farms, MI, in that same article. “If the scenario is that your kids are going through a divorce or a job loss and you want to help them, tying them to a permanent location may not help. If they are dealing with the financial consequences of credit problems, helping them pay off their credit card debt may be more important than buying a home. But if you are helping a young couple with stable jobs who just haven’t had time to save for a down payment, and you can easily afford to help, this could make sense.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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