Parents are key to helping you cross the finish line to home ownership!
Parents are great for a lot of different reasons!
Here in SF, I see time and time again, parents partnering with their adult kids to help them get into the housing market since affordability can be tough. They help in many different ways from gift funds for a down payment, partnering on a loan, structuring a private loan direct to their kid and much more. My go to finance partner, Valerie Avril of Wells Fargo shared the following topline information on the main scenarios on how parents can help. Each case is unique, but the info below provides a great overview:
There are three different instances in which a non-occupant borrower can contribute to the credit application of the occupying applicant:
- Occupant borrower meets standard debt ratio requirements on his own ==è subject property is considered a primary residence. In this case, the borrowers do not need to be related and non-occupant borrower can be involved with the credit application by providing down payment assistance.
- Non-occupant borrower meets debt ratio requirements on his own subject property is considered a 2nd home. Occupying relative is on the credit application but income is not needed to qualify. Down payment can come from either occupying or non-occupying applicant.
- Both borrowers’ income is needed to qualify ==è subject property is considered investment property and the borrowers do not have to be related. Down payment can come from either occupying or non-occupying party.
Down payment requirement will vary depending on which scenario applies. FYI, this type of financing is NOT exclusive to condos although the most common situation is parents purchasing a condo for a child. - Valerie Avril