Family Member Assistance Programs A View From A Mission Viejo Realtor

With the affordability index at the highest level in history it's no wonder so many first time buyers are deciding now is the time to buy a home. Parents are co-mortgaging with their children to help them take advantage of the opportunities in real estate today. The question is, how and who qualifies for the financing?

Conventional Financing

When a buyer is receiving gift funds for the down payment the buyer must have 5% of their own funds towards the down payment unless the gift is 20% or more. If the gift is greater than 20% then the buyer does not need 5% of their own funds. Under this scenario the borrower would be qualifying alone and just using gift funds for the down payment and closing costs.

What happens if the parents want to buy a home for their son or daughter but he or she doesn't qualify for some reason? If the parents put 20% down and their son or daughter moves into the property we will designate it as a second home. The advantage to this feature is the home can be right next door, the rates are the same as owner occupied and there is no mortgage insurance. Only the parents go on the loan so their kids do not have to qualify. The maximum loan amount is $417,000 and the financing is for either condominiums or single family residences.

FHA Financing

Under FHA guidelines the parents can gift 100% of the 3.5% down payment and all of the closing costs. Their kids do not need any of their own funds. However, the children must always be on the loan and it is always considered owner occupied. The key point is if the owner occupant son or daughter does not qualify on his or her own then the emphasis of qualifying is put on the non-occupant, co-mortgaging parents.

It is a very simple process. The combined income and debts of each family member are added together including the new complete mortgage payment. The standard debt to income ratios are used for qualifying as that of an individual buyer. The advantage to this feature is the primary occupant does not have a minimum income requirement. However, any income they do have is used to offset the monthly payment making it easier for the parents to qualify. FHA financing is helping many family members qualify together for home ownership.

On a side note, FHA financing is not limited to first time homebuyers. For more help call us.