It’s becoming increasingly common for people to buy a house with their parents. For one thing, many families like the idea of having multiple generations under the same roof. This arrangement gives older adults the chance to age comfortably and safely around loved ones and their children the flexibility to pursue other goals while still owning a home.
But not everyone sees the proposition as a no-brainer. Maybe a couple bought a house earlier in their marriage and remembered the challenges that came along with it. Perhaps they worried about additional issues if they involved another party in the transaction.
We’re here to tell you that you can co-own a residence with your parents and enjoy a smooth buying experience. Keep the following tips in mind before starting the process.
Compromise on the qualities of the house
In pretty much any other scenario, we advise Coloradans to get pre-approved first. As we’ll discuss in greater detail in the next section, pre-approval shows sellers that you’re serious about making an offer. That may not be the right initial move when you’re buying a house with relatives, though.
Spend some time listing the must-have qualities of this house. Determine the ideal configuration of the floor plan, as well as the number of bedrooms and bathrooms. Would your parents prefer to live on the main floor to avoid constantly going up and down the stairs, or would they opt for their own living space in the basement?
Agreeing on a house with your parents can be anything but easy. The things you want in a home will likely differ from what your parents want. Your best bet is to lay everything out on the table, and be open to compromise.
Decide on payment
Next, assess the financial situation of you and your parents. Does either party have significant cash reserves for a large down payment? If so, could you explore an all-cash purchase?
Don’t get discouraged if you aren’t able to come up with a sizable down payment. There are assistance programs available whether you’re purchasing a home yourself or with other people. The takeaway from this step is that you calculate each party’s percentage to contribute to the home purchase.
Obtain a pre-approval letter
We can’t emphasize enough the importance of getting pre-approved, especially in this competitive market. It’s to the point where sellers will only consider offers from borrowers who already received the green light from a trusted lender. Trust us; you will avoid delays and frustration by having your financial ducks in a row and seeing how much home you can afford.
Those new to the home buying process should know what pre-approval entails. In short, lenders must evaluate your financial history before signing off on a loan. They need to be confident that you can pay back a mortgage, even if you have extra help from relatives.
Expect your lender to ask for various forms of documentation from you and your parents, including bank statements, tax returns, and pay stubs. Remember to check both parties’ credit scores and do what you can to improve them ahead of time. Higher scores could mean a lower rate and, in turn, a lower monthly payment for your household.
Find the right agent
Meet at least several real estate agents with your parents. If a realtor doesn’t feel comfortable working with a multi-generation buyer, move on to the next one on your list. It’s imperative that everyone feels comfortable as you start looking at homes.
Seek legal assistance
We saved arguably the most difficult part of the process for last. In a typical household, either one individual or a married couple has ownership of the residence. Adding a second party, such as parents, complicates things a bit.
The good news is that you have options when you’re ready to finalize property ownership. Tenancy in common makes each person a legal owner of their share of the house. Joint tenancy with right of survivorship, on the other hand, ensures that if any of the owners pass away, their share goes to the surviving owner.
Our advice? Talk to a lawyer and get these details squared away as soon as possible. You and your parents will be much happier knowing there’s a plan in place.
Contact our Denver real estate agents
We would love the opportunity to help you achieve your real estate goals. At American Home Agents, we understand that every client’s experience will be different. But you can count on us to provide unmatched service and years of expertise.
Give us a call at (303) 695-5900 or check out our current listings in the meantime.