There is currently a growing trend of grown children buying their parents’ home. This can work out well if your parents are looking to downsize their home either locally or in another state, or if you all agree that they should continue living in the home with you. If you love the home in which you grew up and are considering purchasing it from your parents, there are several things to consider.
It’s a wise idea for you and your parents to consult with a lawyer and/or an accountant before you begin the process of purchasing your parents’ home. There may be tax ramifications for both parties involved in this transaction as well as inheritance issues if you have siblings. Be sure that any agreement arrived at between the parties is put in writing.
The Purchase Price
Assuming your parents will be selling you their home without the help of a real estate broker, it will be up to you and them to determine an appropriate price. To arrive at this number, you should review the sales prices of comparable homes in the area that were sold in the last six months.
The Down Payment
A down payment is typically the biggest obstacle to overcome before buying your first home. After all, it’s not easy to save such a large amount. But this obstacle can become much smaller if you are buying your parents’ home and they are willing to provide a gift of equity. This would give you the ability to buy their home with little to no cash down by using the equity in the home as the down payment.
The Mortgage & Closing Costs
You may be disappointed to learn that obtaining a mortgage to purchase your parents’ home is no easier than getting one to purchase a stranger’s home. Lenders have the same exact criteria for mortgage qualification regardless of whose home you are purchasing. Closing costs will likely be very similar to those involved with purchasing anyone else’s home as well.
If you’re considering buying your parents’ home, help is just a phone call away. The home loan experts at Cliffco Mortgage Bankers can provide you with the assistance you need to obtain a mortgage. Call us today at (516) 408-7300.