How common is it to receive money from family members to put towards buying a home? Cause I’ve been talking to various lenders and real estate agents lately and a bunch of them have mentioned I could borrow from family members. I’m not sure if it’s cause I’m maybe a bit younger to be buying my own place so they assume I’m from generational wealth or if it’s cause they think I can’t afford anything and rather than tell me that just say I could borrow from family or maybe it’s just a super common thing to do and I’m out of the loop or a fourth option maybe they all have generational wealth. Idk it’s just an annoying thing to be asked because I would feel out of pocket even suggesting it and they all bring it up like it’s no biggie.
When we were in the process of house shopping 9 years ago, my beloved grandfather lost his battle with lung cancer. I emailed our real estate agent to ask her to cancel the next couple days of showings while my husband and I flew back East for the memorial service. Her response basically boiled down to "Sorry. But let me know if this changes your budget because you'll be inheriting a bunch of money!" If she'd said it to my face I would've punched her.
We did not, in fact, inherit any money from my grandfather. But her callous comment made me think that either
a) inheriting does happen from time to time during house-hunting
b) the only people able to afford their first homes these days are those who get help from older family because the market is currently insane
c) real estate agents want to do anything possible to increase buying costs because they personally benefit from a larger commission.
All of which is to say... I think these agents are being dickheads and you should either ignore them, tell them to stop being assholes, or fire them.
The Rent Is Too Damn High: The Affordable Housing Crisis, Explained
Season 2, Episode 2: “I'm Not Ready to Buy a House---But How Do I *Get Ready* to Get Ready?”
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I spoke to an independent mortgage broker on Monday, he actually told me that 'gifts' are very common to help people who can pay a mortgage, but do not qualify for one because rent is too damn high.
He said that some people do it as a loan, some as an actual gift.
He also said that me [single, not looking for a live in partner] getting a co-signer would also help. He suggested a parent or relative with good credit and not someone who would be a fellow first time home buyer.
This is Canada btw. BC even.
Family assistance is pretty common when purchasing a home. Everyone I know who's bought a home in the last mumblemumble years has been asked this question, and I'm pretty sure that half the people I know who've bought homes have had some sort of family assistance. Houses are damn expensive!
The thing is that if you are receiving any assistance with the down payment, which could be a gift from friends/family or some areas have grants to encourage people to buy in their locality, these have to be properly documented. In the US your mortgage lender requests two months of bank statements and if there are any large deposits in that time they will require documentation to prove where that money came from.
The reasons for this are primarily to prevent straw loans (where the person who’s name on the loan is not the intended beneficiary thereof) and avoid prior liens or changes to one’s debt-to-income ratio. If you withdrew from a 401k to make the down payment that’s fine, but if you did a 401k loan, then that changes your debt-to-income ratio. If you received a gift from a friend/family member then they have to write a letter saying that, but if they loaned you the money that could be considered having an interest in the property, which your mortgage lender is going to be leery of. If you received a grant, there are usually specific stipulations to it that need to be followed. Some go on as subordinate liens that need to be paid back if the house is later sold, some are forgiven after a period of time, some require the borrow to keep the home as a primary residence longer than the mortgage lender does.
Your mortgage lender wants to get you to closing as smoothly as possible, and that means no surprises that could get your closing date pushed or the loan denied. They’re asking because like anyone in customer service, they know that they’re dealing with people who mostly don’t know these things and might not tell them, so they’re trying to get ahead of any surprises. It sucks for everyone to get most of the way through the process and have a surprise pop up and delay closing and maybe the seller’s okay with that and maybe the seller’s not and the buyer loses the house and their earnest money because they made a mistake in the application process.
A good realtor foresees these possibilities and writes the contract accordingly, but a negligent one can really screw hopeful buyers over. And a good mortgage lender keeps their loan in compliance with the law while working with a public who’s generally not aware of all the laws involved in the process. So it’s a good idea to ask if grandma’s helping out with the down payment.
Though of course really shitty to say “well hey, think of what you’re inheriting” when a family member dies. That’s just… bad.
