When Should You Help A Family Member Buy A House?
~ By Daniel McGregor ~
When you get a mortgage, the interest rate a lender will offer you will depend on many factors, such as the loan program, size of down payment, credit history and so on. One of these factors is occupancy. In other words, do you intend to occupy the property as primary residence? Is it a second home in the mountains? Will you be renting it out as an investment property? You usually have to occupy the property yourself to get the best interest rates; however, there are a few important and little known exceptions to this rule. The purpose of this article is to talk about those exceptions.
For example, if you have an elderly parent or a disabled adult child that has insufficient income to qualify on their own, then you may be able to purchase a home for them. This can promote their sense of independence which can have positive mental health benefits. Also, if you have student in your life attending undergraduate, graduate or professional school, such as medicine or law, then once again, you may be able to purchase a home for them. In this case, a relative other than the parents can be involved as well.
The good news is that, in each case above, the lender may be able to offer the lowest interest rates available for the loan program being considered. Usually, this will be a thirty year fixed mortgage. Your income and credit would be used to qualify for the mortgage and you would hold title to the property. Remember, you do not have to occupy the property.
In the current Denver Metro market, this can make a lot of financial sense because rents are high relative to mortgage payments. So, purchasing a home for a family member can lower ongoing living expenses and build equity in the property. In the case of a student, it can make even more sense if roommates move in to help defray the mortgage payment. The savings and equity gain combined can reach many tens of thousands of dollars over the time span of being a student. In todayÕs day and age, such savings might translate into dramatically lower student loan debt.
Naturally, there are ins and outs to these programs. I invite you and anyone else you think would be interested in learning more to attend a presentation I am giving at the Koelbel Public Library on Saturday, February 11th and again on Saturday, February 25th.
Daniel McGregor, Mortgage Specialist, NMLS# 235061. Loan Simple in Englewood, CO NMLS# 3032. Direct at 303-863-1953, email@example.com. The following is not an offer of credit nor has Loan Simple obtained any qualifying information.