In a span of a couple of weeks, a few of my clients informed me that they will no longer be purchasing their first home...alone. Rather, these clients have decided to purchase their first home with their parents instead.
In the past, I've had numerous Buyers who received gift funds from their parents. According to a recent MarketWatch article, 66% of millennials are expecting some type of help from their parents when it comes to purchasing his or her first home. In addition, I had a few Buyers who wanted to purchase on their own, but only to decide to purchase with their significant other as well.
From the client's perspective, receiving gift funds is probably the easiest way that he or she can get financial help. Knowing that, I recently wondered why some parents want to become co-owners his their son or daughter.
With housing prices increasing, many first time home buyers could be squeezed out of the market. As it's often stated, there is still a high demand to live in metro Honolulu; many Sellers are faced with multiple offers. In our market, it's not uncommon for a Seller to open escrow just after a few days of being listed on the MLS.
Although co-ownership with your parents could increase your pre-qualification amount, there are some downsides:
- Unable to qualify for affordable housing condos like Ke Kilohana and Kapiolani Residence (unless you purchase a market unit).
- Unable to qualify for first time home buyer mortgage programs.
- Problems related to tenancy. There are many ways to hold title. Some forms of tenancy pertain to married couples, while others don't. When it comes to joint ownership, it's important all parties understand what tenancy he or she is agreeing too.
If you were a first time home buyer, would you be open to co-ownership with your parents?