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Helping your child achieve the dream of homeownership

Rising rents, housing costs, and student loan debt make it difficult for many young adults to save for a down payment, so families often lend a helping hand.

You remember what it was like to buy your first house. The excitement and nerves that went along with such a big purchase. And the memories you created that turned your house into a home.

You want your children to experience homeownership as well — and they do too — but it’s hard to make that dream a reality in today’s world.

Nearly 75 percent of American adults believe that homeownership is the pinnacle of the American Dream — even more so than being able to retire and having a college degree, successful career, or even children.1

And this consensus is shared not just among older adults. Both Gen Zers (59 percent) and Millennials (65 percent) feel like home ownership equals success.1

Unfortunately, many Gen Zers and Millennials are paying high rent as well as student debt loans, not allowing them to save for a down payment on a house. In fact, student debt is a major obstacle to young people buying a home.2

For example, first-time homebuyers in Florida required 12.4 years to repay their student loans and save 10 percent of their income for a down payment while first-time homeowners with no student loan debt needed 8.7 years to save for a down payment.3

With or without student loans, homes are expensive and hard to afford for many want-to-be first-time homeowners. According to the National Association of Realtors, the median price for a home is $366,900.4 Home prices have been on the rise since the pandemic, increasing roughly 34% since the spring of 2020.1 And mortgage rates are expected to stay in the 5.5% to 6.5% range.5

That’s why many parents — who are in a financial position to do so — decide to help their children put money toward the down payment (20%) of a conventional loan. In fact, almost 25% of first-time homeowners ages 22 to 30 are gifted cash to use on their down payment.6 That’s significant, given the fact that a down payment for a $366,900 home would be close to $74,000.

If you’d like to help your responsible adult child purchase a home, there are several options to consider. Here are a few of them:

Give money to contribute to the down payment on their loan, or other expenses

Helping your child come up with a 20 percent down payment on their loan will save them money in more ways than one: You may help them get a better interest rate on their loan and they avoid private mortgage insurance (PMI).7

The IRS has a set annual gift and estate tax exemption. In 2023, a parent can give up to $17,000 each year to each child without having to file a gift tax return.8

That amount of money could help your child reach their goal of owning a home.

To make an even bigger dent in your child’s down payment, you could gift the maximum over two calendar years. For example, if you gifted $17,000 in December and January to your child and their spouse, it’d amount to $68,000. And if your spouse did the same, the couple could get a total of $136,000.9

If you have the means to do so, it’s worthy of consideration. If you don’t, you can still help them avoid PMI with an 80-10-10 loan. The bank provides an 80 percent loan, your child puts down 10 percent, and you put down 10 percent.7

Gifting this money to your children now — while you’re still alive — can reduce estate taxes later, after you’re gone. 7 Plus, you get to see their appreciation for your gift now and enjoy time spent together in their new home.

Provide an intra-family loan/private loan

Perhaps you think the more responsible route is to provide your child with a loan. If you do, don’t put more than 5 percent of your assets into the purchase, and be sure to put together a legal document outlining the perimeters, and a payment schedule. 7

You might want to hire a real estate attorney to do so.

You will need to set an interest rate, one that is at least as high as the minimum rate set by the IRS. This is called the Applicable Federal Rate (AFR), which is usually a lot lower than the best mortgage rate you could get at a bank.9

Down the road, if you want to forgive a portion of or all of the loan, you can do so. Currently, it’s $17,000 per person per year.10

Co-sign a mortgage

If your child cannot qualify for a large enough loan, one option is to co-sign their loan application.

Likely this will increase the chances of your child being approved for a loan, but it can be a risky move (if your child takes a financial misstep) and it will impact your credit score.10

And since some lenders combine both of your debt-to-income ratios, your child might not get the best mortgage rate that’s available.9

When all is said and done, many experts will tell you to avoid taking the co-signing route.

Have a co-ownership agreement

Otherwise known as an equity sharing agreement, it allows you and your child to share in home ownership. While you provide the down payment, your child takes on the mortgage — allowing him or her to deduct mortgage interest and receive capital gain exemption. Usually, the property needs to be sold within a set time period or a particular event, such as a divorce.9

Be sure to have a legal agreement that spells out all the specific details.

Plan ahead

If your child wants to own his or her home, it’s important they start planning for it now. Encourage your child to save money and build a good credit score. And once they’re ready to embark on the home search, encourage them to find a home they can afford. That means they might need to look in different neighborhoods and, in some cases, different states.

As a parent, you want what’s best for your child. However, you must also consider your financial needs, especially as you move closer to retirement. That’s why it’s important that you work with your financial advisor, tax professional, and attorney to help you think through the financial — and emotional — aspects, so that whatever move you make to help your child is a good one for everyone involved.

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1. Huddleston Jr., Tom. “Millennials and Gen Zers do want to buy homes—they just can’t afford it, even as adults,”, June 12, 2022.

2. "Homeownership rate in the U.S. 2021–2022, by age,”, January 13, 2023.

3. "Number of years first-time homebuyers need for down payment in U.S. metros 2019,”, November 6, 2020.

4. “Existing-Home Sales Receded 1.5% in December,” National Association of Realtors, January 20, 2023. 

5. “Pending Home Sales Increased 2.5% in December, Ending Six-Month Slide,” National Association of Realtors, January 27, 2023. 

6. Fischer, Matiah. “Helping Your Adult Child Buy a Home,”, February 5, 2022. 

7. Haverkamp, Kirk. “Parental Guide: Buying a Home for Your Child,” 

8. Erskine, Matthew. “IRS Announces Estate And Gift Tax Exemption Amounts For 2023,”, November 4, 2022. 

9. “Strategies to Help Your Child Buy a Home,”, October 4, 2020. 

10. “Tips for helping your children buy a home without impacting your retirement,”


This is a general communication for informational and educational purposes. The information is not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. If you are seeking investment advice or recommendations, please contact your financial professional.

This information is a general discussion of the relevant federal tax laws provided to promote ideas that may benefit a taxpayer. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. Taxpayers should seek the advice of their own advisors regarding any tax and legal issues specific to their situation.

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