You have seen your child through life to the point of adulthood. There is no greater joy than seeing them grow into successful and responsible individuals.
Speaking of responsibility brings to mind the moment they decide to get a house and leave home. This can be a great bonding opportunity for both parties as you can provide guidance and help make the process easier for them. This can be done without causing financial difficulties.
The prevailing economic situation, characterised by mounding college debt, tough job environment, and high property prices, has made purchasing a home more difficult for the younger generation.
Luckily, there are several things you can do to expedite the home buying process for your children. Keep reading as we take a look at a few of them:
1. Boost their credit score
A good credit score is essential for a mortgage pre-approval. It qualifies for lower mortgage rates, higher mortgage amounts, and lower down payments. As a young adult, it is not easy to attain an excellent credit score because it takes time to achieve a good credit history. This is where you come in.
If you have a good credit score, you can add your child to a few of your existing accounts – this is known as adding an authorized user. It can improve your child’s credit score quickly.
2. Help with the down payment
Home buyers are not required to make a down payment out of pocket. This means you can gift the down payment. You first have to provide a statement of account to show that you can afford to make the payment. Make the payment into your child’s account or the escrow account.
Co-borrowing helps overcome an unfavourable debt-to-income ratio as well as a limited credit history. It works by having you apply for mortgage alongside your child. You have to meet the credit requirements of the lender and sign the loan papers with your child at closing.
You may need to draft a family contract that defines expectations and other details such as equity due to each party after the home sells.
Keep in mind that co-borrowing entails that you and your child are equally responsible for the loan and any missed mortgage payments. Also, your credit could be affected. Even if your child makes payments on time, you might find it difficult to finance another big purchase later.
Not all loans allow co-borrowing. When shopping for mortgages, confirm the option is available.
4. Cover expenses
Getting the money needed to purchase a home can be burden. By covering expenses for your child for a few months, the savings allocated to make the purchase can add up quickly.
Buying a home is no longer as affordable as it used to be due to strict lending policies and high down payments. If you are capable, you can lend a hand by taking any of the alternatives as discussed above. Help your child own a home today.