Home prices in Washington State have risen steadily over the last couple of years, outpacing nearly every state in the country. As a result, some younger buyers need a little help when buying their first home. And family members are a great place to turn.
There are several ways that parents can help their children buy a home in Washington. Today, we’ll take a look at two of the more common strategies — cosigning the loan and pitching in on the down payment.
Parents Helping Their Children Buy Homes
It costs more to buy a home in Washington today than it has in the past. Home prices in most parts of the state are higher now than they’ve ever been before. So for younger and first-time buyers, the idea of qualifying for a mortgage and buying a house can seem like one big hurdle.
That’s one of the reasons why parents often seek ways to help their children buy a first home in Washington. It’s a common practice all across the country, in fact.
A recent report published by the National Association of REALTORS® (NAR) found that almost one-fourth of millennial home buyers had their relatives help out with the down-payment expense. Parents, in particular, were listed as a common source of financial help.
According to the NAR report:
“Overall, the median down payment ranged from 7 percent for millennial buyers to 21 percent for older boomers and the Silent Generation. Nearly a quarter (23 percent) of millennials cited a gift from a relative or friend – typically their parents – as a source of their down payment.”
Down Payment Gifts and Cosigning
So, what can a parent do to help a son or daughter buy their first home in Washington? Down payment gifts and cosigning are two of the most common strategies. Here’s how they work.
Down Payment Gifts
We’ve written about down payment gifts in the past. As you might have guessed, this is when a close friend or family member provides funds to help the home buyer purchase a house. The gift money is typically put toward the down-payment expense, and sometimes the closing costs. This is one of the more common ways parents can help their children buy a home.
Most of the mortgage loan programs available to borrowers in Washington allow for down payment gifts. The rules and requirements can vary, depending on what type of loan is being used. One of the standard requirements is that the money being provided must truly be a gift. The donor must state this in a letter, which will go into the loan file.
Cosigning the Mortgage Loan
Some parents choose to serve as a cosigner on the mortgage loan, to help their children qualify for financing. In some cases, having a cosigner can make it easier for the primary borrower to get approved for a mortgage loan. This is especially true when the person cosigning has a good credit history and stable income.
There are two main types of mortgage cosigners: occupant and non-occupant. An occupant cosigner is one who will actually live in the home that is being purchased. A non-occupant will cosign on the loan, but will not actually live in the home.
The main thing to remember here is that the cosigner becomes partly responsible for the repayment of the debt, should the homeowner be unable to make the payments for some reason.
Ready to Apply For a Mortgage in WA State?
Do you have questions about home loans? Are you ready to apply for a mortgage to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest. Contact us today with any questions you have about mortgages.