Ways to Buy a Home for
a Family Member

Exploring All the Ways to Buy a Home for a Family Member

Life can get complicated when a loved one needs a little extra help securing a home — whether it’s aging parents, grandparents, or a disabled adult child. The good news? There are several ways to make homeownership a reality for the people you care about, without stretching your finances too thin.

Some families choose to co-sign a mortgage to help a loved one qualify, while others opt to purchase and rent the home to them or offer a gift of equity to keep a family property in trusted hands. If you’re looking for a structured loan program designed for this exact situation, the Family Opportunity Mortgage allows you to buy a home for a parent or dependent at primary residence rates without it being classified as an investment property. The best option depends on your financial situation, long-term goals, and family dynamics. Let’s explore the different ways you can help a loved one step into homeownership while keeping things simple and financially smart.

 

Co-Signing: When a Little Extra Credit Goes a Long Way

Co-signing is a great option for young buyers who have limited credit history or lower income but can comfortably afford mortgage payments. Let’s say your child is fresh out of college, working part-time, or just starting their career. Even if they have a solid rental history and good financial habits, lenders may still see them as a risky borrower due to their lack of credit history or income. Co-signing a mortgage can help bridge this gap.

How Co-Signing Works
A parent (or any family member) co-signs the mortgage, meaning they take on equal financial responsibility for the loan. The home is classified as a primary residence, which means your child gets access to lower interest rates than they would with an investment or secondary home loan. The child makes all payments, but if they default, the parent is legally responsible for covering the loan.

 

Buying a Home and Renting It to Your Child

For parents who see real estate as an investment, purchasing a home and renting it to their child can serve multiple purposes. Not only does this provide stable housing for the child, but it also allows the parents to retain ownership of the property and benefit from potential long-term appreciation.

Unlike co-signing, this approach allows parents to maintain control over the asset while helping their child avoid the competitive rental market. The child gains a place to live with predictable rent payments, and the parents gain a property that could later be sold, rented to others, or transferred to the child down the line.

Things to Keep in Mind

• Mortgage rates on investment properties tend to be higher than those for primary residences.
• The child may still need renter’s insurance and a formal lease agreement.
• Parents will need to handle maintenance, taxes, and other landlord responsibilities.

 

Using a Gift of Equity to Transfer a Family Home

When parents or grandparents own a home that’s mostly paid off, they may choose to sell it to their child at a reduced cost rather than listing it on the open market. This is where a gift of equity can come into play. Instead of requiring a traditional down payment, the parents apply a portion of the home’s value as a gift toward the purchase. This can make homeownership significantly more affordable for the child while ensuring the home remains in the family.

Mark and Linda are downsizing but want to keep their home in the family. Instead of selling for $300,000, they sell it to their daughter Sarah for $250,000, gifting her $50,000 in equity to cover the down payment. This helps Sarah secure a mortgage with little upfront cost — turning a family home into her first home.

 

Gifting a Down Payment: A Direct Approach to Homeownership

One of the biggest challenges first-time buyers face is saving for a down payment. Even with good credit and steady income, coming up with 10-20% of a home’s price can take years. Parents who are financially able may choose to gift a portion (or all) of the down payment to help their child secure a home sooner.

Lenders allow family members to provide a down payment gift, but it must be well-documented to ensure the money doesn’t count as a loan. A formal gift letter stating that the funds do not need to be repaid is required.

How Gifting a Down Payment Helps

• A larger down payment reduces monthly mortgage payments and lowers interest rates.
• Buyers may qualify for a Conventional Loan instead of a more expensive loan option.
• The child avoids the burden of private mortgage insurance (PMI) if they put down 20% or more.

 

The Family Opportunity Mortgage in Action

The Family Opportunity Mortgage makes it possible to assist a loved one in purchasing a home by leveraging your own financial standing. Instead of sticking to a one-size-fits-all approach, this program adapts to a variety of family dynamics, whether it’s helping an elderly parent or offering support to a disabled adult child. This program allows you to create a stable foundation for your family without putting unnecessary strain on your finances. Here are some real-world examples of how the Family Opportunity Mortgage can work for you and your family:

Helping Aging Parents
Lori, in her 40s, has been noticing her mom struggling with the rising cost of rent and the difficulty of keeping up with a traditional apartment. Worried about her mom’s long-term stability, she decides to use the Family Opportunity Mortgage to buy a single-level home that’s easier for her mother to navigate. By using her own financial resources, Lori is able to purchase a home that not only suits her mom’s health needs but also offers her a stable place to live without the looming uncertainty of rent increases.

Assisting Parents with a Disabled Adult Child
The Family Opportunity Mortgage is also a great option for parents who want to ensure their disabled adult child has a safe and permanent place to live. With the program’s flexibility, a parent can purchase a home tailored to their child’s specific needs, whether it’s a home with specialized features or simply a stable environment free from the uncertainty of group housing or transitional care. By using their financial resources, the parent ensures that their child’s living situation is secure for the long term, removing the stress of worrying about housing changes in the future.

Helping Grandparents
For younger buyers, it’s not just about helping parents — it might be about stepping in to support grandparents as well. Whether it’s purchasing a home for them to ensure they’re well-cared-for or simply offering a stable living situation, the Family Opportunity Mortgage provides a way to do so.

Multiple Siblings Joining Forces
Another way the Family Opportunity Mortgage can work is when multiple siblings team up to buy a home for a parent or elderly relative who needs assistance. Pooling resources to purchase a home means that no single sibling bears the full financial weight, and the mortgage is held jointly, sharing the responsibility. This collaborative effort further eases financial strain.

 

Why the Family Opportunity Mortgage Works

The Family Opportunity Mortgage offers affordable down payments (as low as 5%), better loan terms (with lower interest rates compared to second homes or investment properties), and invaluable peace of mind. It allows families to support loved ones with a secure, stable home without straining their finances, offering both financial flexibility and the comfort of knowing their family members are taken care of long-term.

How to Get Started with the Family Opportunity Mortgage
The first step in helping your loved one buy a home is discussing the Family Opportunity Mortgage with a mortgage professional. It’s important to take a proactive approach in exploring your options and understanding how the program can work for your specific situation. And, of course, making sure they (and you) qualify. Treadstone’s team is here to guide you every step of the way, offering personalized advice and helping you navigate the details. Reach out to us today, and let’s explore the best way to make homeownership attainable for your family.

 

Choosing the Best Option for Your Family

Every family’s situation is unique, and there’s no one-size-fits-all approach to buying a home for a loved one. Some parents prefer to gift a down payment to help their child qualify, while others see real estate as a long-term investment by purchasing and renting it back.

Before deciding, ask yourself:

• How much financial risk are we comfortable taking?
• Will this impact our ability to qualify for future loans or retirement savings?
• Is our child or loved one ready for homeownership responsibilities?

Buying a home for a family member can be a powerful way to build stability and generational wealth — whether through a Family Opportunity Mortgage, co-signing, or a gift of equity.

 

FAQs

What if my child can afford a mortgage but doesn’t qualify on their own?
This is where co-signing a mortgage can help! If your child has a steady income but limited credit history, you can co-sign their loan to strengthen their application. Just remember, this means you’re legally responsible for the mortgage if they can’t make payments, so be sure they’re financially ready for homeownership.

What if my parents already own a home, but I want to help them downsize?
If your parents have significant home equity, they can sell their home to you at a reduced price using a gift of equity. This allows you to buy the home with a built-in down payment, making it easier to secure a mortgage while keeping the property in the family.

Is it better to co-sign or buy a home and rent it to my child?
It depends on your financial goals, risk tolerance, and long-term plans. Co-signing helps your child qualify for a mortgage but makes you legally responsible for the loan. On the other hand, buying and renting gives you ownership of the home, but you’ll take on landlord responsibilities and a higher mortgage rate since it’s considered an investment property.

If you’re unsure which option is best, a mortgage professional can help weigh the pros and cons based on your situation.

What is a family opportunity mortgage?
A Family Opportunity Mortgage is a special loan program that allows you to purchase a home for a family member, such as a parent or disabled child, using your own financial resources. It offers lower down payments and favorable loan terms to help families provide stable housing for loved ones.

Can I buy a second home and let a family member live there for free?
Yes, but keep in mind that if you don’t use the Family Opportunity Mortgage, the home may be classified as a second home or investment property, which comes with higher interest rates and different lending requirements. It’s best to talk to a mortgage expert about structuring the loan in the most cost-effective way.