Families Step in to Help Kids Buy a Home

Employment troubles, large student loan debt, and tight underwriting standards have been major hurdles holding back potential first-time home buyers in their 20s and 30s, the Los Angeles Times reports.

In 2012, Americans 30 to 34 had the lowest home ownership rate of any similarly aged group in recent decades at 47.9 percent, according to demographer Chris Porter of John Burns Real Estate Consulting. As comparison, Americans born between 1948 and 1957 had a 57.1 percent ownership rate by the time they were in the 30 to 34 age group.

Studies have shown a strong desire among 20- and 30-somethings to buy a home, but their finances are holding them back from making such a move. As such, more relatives are stepping in to provide assistance with downpayment and closing costs. Twenty-seven percent of first-time buyers received a money gift from relatives last year.

Instead of just handing over money, some family members also are serving as “mini-lenders” themselves to help their adult children purchase a home, The Los Angeles Times reports. The family members may provide a second mortgage or first mortgage that are designed to deal with the relative’s financial hurdles,  like paying off student loans to reduce debt-to-income ratios (which has been a hurdle for many in qualifying for a loan). What’s more, the loans can provide annual returns to family members that have been known to perform better than money-market funds or bank deposits.

Source: “Finding Ways to Help Young Adults Make Their First Home Purchases,” The Los Angeles Times (Feb. 16, 2014)