Mortgage Advice when Helping Your Children Buy in Anchorage

Posted by Dan Wolf on Friday, September 18th, 2015 at 8:02am.

Helping your children buy a home often proves a better investment than a college degree for a career they didn’t pursue. With the prices of homes rising in Anchorage, Alaska, it’s not surprising a growing number of parents want to help their children achieve the American dream. According to an article by itemlive.com, millennials in their 20s and 30s find it hard to save up for a down payment on a home. A survey by loandepot showed in the past 5 years, 13 percent of parents with young adult children between of 20 and 38 assisted their child buy a home. Of those who helped, 65 percent put money toward the down payment while 24 percent gave them money for the closing costs. Experts say parents can also co-sign a mortgage loan, but need to understand the ramifications especially if helping a single child who later marries. Before stepping in to help your child buy a home in Anchorage, real estate experts recommend talking to a mortgage lender as well as your Realtor about your goals, fears and expectations.

•    Examine your finances

Before agreeing to help your young adult child buy a home, make sure you are financially sound. A Realtor will help you figure out how much equity you currently have in your own Anchorage home. Knowing whether you could sell your home at a high profit will likely give you a greater comfort level. Depending on your age, keep enough money aside for retirement.

•    Start with cash

Ideally, help your children buy a home with a cash gift as opposed to a mortgage loan. By helping with cash, your credit score is not negatively affected in cases of default. If you have several children, you could divide cash payments between several children or change the estate plan to make up for the cash gift given before you passed away. Although experts recommend against taking out of a retirement account, the only exception is the Roth IRA. You can take money that you put into a Roth without owing taxes. For those interested in Anchorage foreclosures, banks sometimes require a cash-only offer.

If you do decide to co-sign a mortgage loan with your child, it will likely help their credit score if you step in on occasion. Even if you have high confidence in your child as a responsible person, the job market is not predictable. A lender will let you know what mortgage rate you would get and whether your child qualifies with or without a co-signer. Some lenders require all borrowers be on the title of the home.

At Wolf Real Estate, we work with young buyers and their parents. For more information about trends in mortgages and the pros and cons of getting a mortgage with your child to afford an Anchorage home, please contact us at 248-9653 or visit us online at www.anchoragehomesearch.com.

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