Lee Morof's Real Estate Blog

One of the most common dreams is homeownership; however, the cost of buying a house is rising quickly, and many children cannot afford to buy a house even after they finish school. They might be encumbered with student loans, and they could have a difficult time finding a job. Fortunately, there are ways parents can help their adult children buy a home.

Help Children Build A Healthy Credit History As Early As Possible

One of the biggest factors involved in an application for a home loan is the credit score. One reason why children have a difficult time qualifying for a home loan is that their credit scores are not high enough. They simply do not have a lengthy credit history. Parents should help their children build credit as early as possible. One way to do that is to help them take out a credit card and co-sign for it, giving children a lengthy credit history of on-time payments when they apply for a home loan.

Let Children Live At Home Temporarily

Another obstacle that gets in the way of homeownership is the size of the down payment. For children to qualify for a home loan with a favorable interest rate, they need to have a sizable down payment. It can take a long time for children to save 20 percent for a down payment, so parents should consider letting children live at home temporarily, rent-free, so they can save money for a down payment.

Offer To Be A Co-Signer

Finally, parents can also make it easier for children to buy a home by co-signing for the loan. While some parents might be reluctant to do so, this could be the best way to help children qualify for a mortgage. If parents are confident that their children can afford the mortgage, they should consider becoming a co-signer to give the lender a greater degree of confidence.

Make It Easier For Adult Children To Buy A Home

These are a few of the best ways parents can make it easier for their children to purchase a new home. Even though homeownership can be a challenge, it doesn’t have to be a fantasy. Parents should start planning for their children as early as possible to make it easier for them to qualify for a home loan.

A significant number of people are self-employed, which means they might be relying on this income to apply for a mortgage. It is true that people who are self-employed may face additional challenges when trying to get approved for a home loan when compared to someone with traditional W2 income, these are obstacles that can be overcome. With the right qualifications and documentation, even first-time homebuyers who are self-employed should be able to qualify for the home loan they need.

Lenders Assess Someone’s Ability To Repay The Loan

First, lenders are trying to make sure the person will repay the loan. Lenders believe that someone with W2 income has a stable job and a guaranteed salary, which means they are more likely to repay the loan; however, someone who is self-employed has other ways of demonstrating that he or she can repay the loan. Self-employed individuals can use tax returns, payroll receipts, and records from financial institutions that serve as documentation of the applicant’s income or assets. This means standard W2 forms and pay stubs might no longer be necessary.

Navigating Eligibility Requirements

Next, self-employed individuals need to meet the eligibility requirements. This includes two years of self-employment, a reliable income, a strong credit score with a clean credit report, cash for a down payment, and a low debt to income ratio. It is possible for a first-time homebuyer to get a loan for less than five percent down; however, closing costs can be significant. Realistically, first-time homebuyers should plan on spending close to five percent of the home’s value to get approved for a first-time home loan.

Understanding Mortgage Options

Finally, self-employed first-time homebuyers should be aware that there are multiple loan options available. For example, there are FHA and VA loans for those who qualify. USDA loans and jumbo loans might also be an option. There are bank statement mortgages and conventional options available as well. Self-employed individuals might have to visit several of these programs to see which ones work the best. The programs vary in terms of their down payment, minimum credit score, and credit history requirements. It is prudent to work with a professional loan officer who has experience helping self-employed, first-time homebuyers get approved.

Nationwide, mortgage rates are low in Michigan and home prices remain relatively low, too. This combination, plus rising rents, is pushing renters in some cities — including Bloomfield Hills — toward first-time homeownership.

Buying your first home can be exciting, but you should also do your research to make sure that you ask the proper questions of the process, and make the best choices for yourself and your household.

For example, recommended questions for first-time buyers to ask home sellers include :

What major repairs have been made to your home?

Although standard disclosure forms are supposed to provide information regarding past damage and renovation to the property, there are occasionally repairs that are omitted or otherwise forgotten.  Be proactive and ask pointed questions about the roof, the foundation, and the electrical system. Some home issue have a way of resurfacing many years later and it’s best to know in advance. •

To which school district does the home belong?

As a first-time homebuyer, you may or may not have school-aged children. However, in many areas, public school rankings positively (or negatively) affect home values. Ask your real estate agent for school district data. Consider asking the seller for feedback, too.

Is this a “distressed” property, and what does that mean to me?

For many home buyers, the allure of a foreclosed home or a home in short sale can be large. Prices are discounted as compared to comparable real estate — sometimes by as much as 20%. However, many distressed properties are sold as-is,” with little room for negotiation. This means that homes may be defective or, worse, uninhabitable. Ask your real estate agent for help with distressed homes and their suitability to your home buying needs.

After asking the above questions, and other questions, too, it’s important to remember that buying a home can be an emotional decision; and one that requires using your “brain” as much as your “heart”. Try to keep emotions in check so that you don’t overpay for a home that’s unsuitable, for example.