In today’s housing market, affordability is one of the biggest challenges homebuyers face. With home prices continuing to rise and mortgage rates expected to stay between 6.5% and 7% in early 2025, coming up with a down payment or qualifying for a mortgage can feel overwhelming—especially for first-time buyers.
The good news? There are ways family members can help. Whether it's through a gifted down payment, co-signing a loan, buying a home for an aging parent or disabled child, or using a gift of equity to cover down payment and closing costs, these strategies can make homeownership more achievable for families.
Let’s explore four key ways families can support each other in buying a home.
1. Getting a Gifted Down Payment from Family
Saving for a down payment is one of the biggest barriers to buying a home, especially when the average down payment in the U.S. was 13.6% ($26,000) in early 2024. A great way for families to help is by gifting part—or all—of the down payment.
How a Gifted Down Payment Works:
A family member gives the buyer money for a down payment with no expectation of repayment. Most loan programs allow this, but there are rules about who can gift the money and how it must be documented.
Which Loan Programs Allow Gifted Down Payments?
✅ Conventional Loans (Fannie Mae & Freddie Mac): The donor must be related by blood, marriage, or adoption. If the buyer puts down less than 20% and is purchasing a multi-unit or second home, they may need to contribute at least 5% of their own funds.
✅ FHA Loans: Gifts can come from family, close friends, employers, or charitable organizations. (See FHA guidelines)
✅ VA & USDA Loans: These programs allow down payment gifts from almost any source, but documentation is required. (learn more about VA home loans)
📌 Important: The lender will require a gift letter stating that the funds are a true gift and not a loan.
2. Using a Family Member as a Co-Borrower (a.k.a. Kiddie Condo Loan)
For buyers who don’t qualify on their own, a family member can co-sign the mortgage and become a non-occupant co-borrower. This is especially useful for young adults, college students, or recent graduates who may not have the income or credit history needed to qualify on their own.
How It Works:
The buyer lives in the home, but a parent or family member co-signs the mortgage, using their income and credit to help with loan approval. (read more about the Kiddie Condo strategy)
Since the home is considered a primary residence, the buyer gets lower interest rates and down payment options as low as 3.5% to 5%.
Benefits of the Kiddie Condo Loan:
✔️ Lower down payment (compared to second-home or investment property loans).
✔️ Lower interest rates because it’s considered a primary home.
✔️ Roommates can help cover the mortgage (for students buying near a college).
This strategy allows families to help young buyers start building equity instead of paying rent.
If you have an elderly parent or an adult child with a disability, you may want to purchase a home for them—but getting a mortgage for a second home can be expensive. That’s where the Family Opportunity Mortgage comes in.
What is the Family Opportunity Mortgage?
This special loan program allows you to buy a home for a family member while treating it as a primary residence—even if you won’t be living there.
Who Can Benefit?
🏡 Parents Buying for an Adult Child with Disabilities: If your child can’t qualify for a mortgage on their own, you can buy the home in your name while keeping the lower rates of a primary home loan.
🏡 Children Buying for Elderly Parents: If your aging parent can’t qualify for a loan due to low income or credit, you can buy a home for them without the higher costs of an investment loan.
Key Benefits:
✔️ Down payments as low as 5% (vs. 10-20% for second and investment homes).
✔️ Lower mortgage rates than an investment or vacation home loan.
✔️ Your parent or child doesn’t have to be on the loan.
This option provides affordable, stable housing for loved ones without the financial burden of an investment property loan.
4. Buying a Home from Family Using a Gift of Equity
Another way families can help each other is by selling a home to a family member at a discount and using that discount as a gift of equity to cover the down payment and closing costs.
How a Gift of Equity Works:
A family member sells their home to a relative at a price lower than market value.
The difference between the sale price and market value is considered a gift and applied as a down payment.
This allows the buyer to purchase the home with little to no cash upfront.
Which Loans Allow a Gift of Equity?
✅ Conventional Loans (Fannie Mae & Freddie Mac): A gift of equity is allowed if the seller is an immediate family member.
✅ FHA Loans: The seller can be a family member, employer, or charitable organization. The buyer must live in the home as their primary residence.
✅ VA Loans: A gift of equity is allowed if there’s no expectation of repayment.
This is an excellent strategy for families who want to keep a home “in the family” while helping a relative become a homeowner.
The Bottom Line: Family Can Be the Key to Homeownership
If you’re struggling with affordability or mortgage qualification, these strategies can make buying a home much more achievable:
✅ Gifted Down Payments help buyers avoid large upfront costs.
✅ The Kiddie Condo Loan allows family members to co-sign and help young buyers qualify.
✅ The Family Opportunity Mortgage provides affordable housing for elderly parents or disabled adult children.
✅ A Gift of Equity allows buyers to purchase a family home with little to no cash out of pocket.
In a market where home prices are rising and mortgage rates remain elevated, having family support can be the difference between waiting and becoming a homeowner now.
Thinking about buying a home with family? Let’s explore your options together! Contact me today to see which strategy is right for you.
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