By Sarah Scrafford, Guest Writer
You would think that the process of buying a first home just got easy what with the slump in real estate prices, but that’s not so, not with lenders being wary of financing mortgages for fear of defaults and no shows. Some people may find it easy to convince mortgage lenders to come around to their point of view, but only if their parents come along for the ride. If mom and dad are willing to foot the bill for your purchases even though you’re all grown up and have left the apron strings behind, then here’s how they can help:
By signing a joint mortgage: The lender takes into account both your income and debt and that of your parents to calculate your mortgage amount. The property, while for all practical purposes seems to belong to you, is titled to both you and your parents. And even though you are financially able to make the repayments yourself, both you and your parents are responsible for late payments and/or defaults.
By signing a guarantee: Your parents are sometimes allowed the option of acting as guarantors for any part of the mortgage amount that you cannot afford to pay. Some lenders allow parents to act as guarantors based on just their financial positions even if they do not hold regular jobs. This option is better suited in terms of ownership since your parents’ names are not featured on the property deed or on the mortgage documents. When you’re financially secure enough to meet the payments through your own efforts, your parents’ part in the process can be relegated to the past.
By offering to pay the down payment: A typically straightforward method, this option allows you to seek a lump sum of money from your parents. The only thing you need to agree on is whether the loan needs to be paid back at zero or at a nominal interest rate, or if their loan is in actuality a gift. If you must pay back the money, set down the terms on paper so that there are no misunderstandings later on.
By matching savings: Some parents may offer to match you dollar for dollar on how much you have saved up, a throwback to the game you played as a child where you were taught the value of saving for a rainy day.
By helping with additional expenses: Buying a home entails more than just paying the down payment and negotiating a mortgage. There are other minor costs involved in the entire process and some parents prefer to remove this burden from their offspring’s shoulders. Others may help out by furnishing the house or buying appliances.
While mom and dad are around to give you the boost that you need, remember, repayment is one rope that you have to climb on your own.
So make sure that you appreciate their efforts and don’t go running to them each time you’re unable to make a payment through choices of your own making.
Author Information:
This article is contributed by Sarah Scrafford, who regularly writes on the topic of international home listings. She invites your questions, comments and freelancing job inquiries at her email address: sarah.scrafford25@gmail.com.
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