If you want to help your parents own a home, you can go about it in several ways. Below are four ways that some people have found useful.
1. Buy and Gift to Your Parents
One way to give your parents a house is to treat it just like any other gift. This means you buy the house and deed it to your parents as a gift. For this method, your parents won't even become involved in the purchase process, so they don't need to come up with the deposit or make the mortgage payments.
This option makes sense if you are wealthy and can easily buy a home without batting an eyelid. However, you need to consult tax professionals first to understand the tax obligations before you go through with the plan.
2. Buy and Rent to Your Parents
Another method is to buy a house and let your parents live in it as tenants with you as the landlord. This is a good option if your parents can easily afford the rent, but they cannot qualify for a good mortgage rate and don't have the down payment.
Again, you have to consider the tax implications before taking the plunge. For example, you can only claim all the tax deductions available to landlords only if you rent the house to your parents at the prevailing market rates.
3. Co-sign the Mortgage
Another option is to co-sign your parent's mortgage. This is particularly a good way to go about the problem if your parents have the down payment money, but they cannot afford the monthly payments without running into financial difficulties.
Note that co-signing the mortgage loan makes you essentially a co-owner of the house as far as the mortgage financier is concerned. This means you will be on the hook if your parent's default on their share of the loan. Carefully evaluate how the loan and the risk of default form your parents might affect your credit rating in the future.
4. Gift Them the Down Payment
The last option is to gift your parent's down payment money and let them handle the rest of the process on their own. This is good if your parents can qualify for and have the means to pay the mortgage, but they are struggling to come up with the down payment.
It's best to give your parents the money far in advance so that the large deposit doesn't show up on the financial statements when the lenders ask for the papers. Mortgage lenders tend to be skittish about the sudden influx of money around the mortgage application time. Since financial gifts are taxable above a certain amount, you should also factor in the tax issues for the donation. Speak with a real estate agent to learn more tips for potential property buyers in your situation.