How And Why To Help Your Child Invest In A Home

A few years ago, the housing market was in a buying frenzy, with sales in high cost areas skyrocketing. Now, with the subprime mortgage crisis and an economic recession, sellers have flooded the market. As a result, housing is more affordable than ever. Is now the right time to invest in your child’s future with the purchase of a home?

Why Home Investments Help Your Child

A home is probably the largest asset you own, and although the value of the home may have decreased recently, the overall value is much better than renting. College debts, planning for retirement and investments are overwhelming for young professionals today. With that in mind, assisting your child with buying their first home means contributing to their financial future.

How To Help Your Child Become A Homeowner

The easiest way to help is by providing the down payment of a house. You act as the guarantor on the loan, while your child pays back all the monthly payments as opposed to paying rent. Those with enough cash can space out the payment as a gift, giving up to $12,000 a year without paying taxes. However, many lenders have gift restrictions, since they view it as a form of debt obligation that could interfere with mortgage payments. Get around this by giving your child the down payment prior to applying for a mortgage.

Parents with their own bills to pay can still help their child by cosigning a loan, which makes the lender feel more at ease knowing that someone else is also in charge of the mortgage. When real estate prices eventually go back up, you can sell the home and earn a profit, thereby getting your down payment back. Your child can get their share of equity to use on another home. Otherwise, he or she can continue living in the house, while you refinance the property to get paid back on your investment.

Looking Out For Your Child’s First Home And Yourself

If you are worried about your child not keeping up with his or her end of the bargain, ensure that he or she will have to move out and you can choose to rent the house or sell it. This is especially important for loan cosigners, since mortgage companies will go back to the parents, which could ultimately affect credit.

Set ground rules before entering any kind of agreement. Family is different from other business relationships, and while it may seem like a good idea to invest and help your child, he or she may not be financially suited for taking on the challenge of homeownership. Make sure everyone involved understand what is required in terms of payments and equity shares to prevent future misunderstandings.

Dealing With Home Inspection Contingency

After months of searching for a home, you have finally found the perfect fit. As much as you want to move, there may be some massive problems with the house, especially if it is a foreclosed home. Taking the time to go through with the home inspection process will save you both money and a headache from the repair work in the future.

How Home Inspection Contingency Works

During the home inspection period, you have the chance to look at every corner, crack and crevice in the house before completing the purchase. If you do find any issues, you are able to terminate the contract and walk away.

The best way to evaluate your potential new home is by hiring a professional home inspector. The price of inspections varies upwards of several hundred dollars. This is not the time to look for ways to save -- it is better to shell out the extra cash now rather than learn after moving in how damaged your house is. Ask your real estate agent for a recommendation.

What To Look For During Home Inspection

No matter how sparkling clean a home looks on the inside, spotlessness does not reveal termites, problems with the furnace or foundation issues. The home inspector should be looking for specific dilemmas that would cost you a fortune to fix.

Examine the age and condition of the roof, the heating system, the electrical system and how the windows are holding up. Also, look at the plumbing system. A sewer lateral inspection will check out the plumbing connection from the house to the city sewage system for leaks or seepage. If any of these have problems, make sure to explore what kind of repairs it would need.

Structural issues need probing, such as searching for any termite infestation or other defects in the building itself. Finally, investigate the home’s foundation. If everything looks good, then sign away on the dotted line! You will be more than thankful later on when you can enjoy living in your new home without worrying about how it will fall apart.