Younger Buyers Asking Family and Friends for Down Payment Help

Here’s a fun statistic: The percent of homebuyers who are relying on family members to assist them with their down payment has tripled during the recession, and is still higher than before the housing crises.  21 percent of home purchases were financed by a loan that was a gift by a family member or friend.   The number has fallen to 13 percent in 2014; and was just 8 percent in 2007, which was before the crises.

What this actually shows is a lack of savings from people buying homes today. Having a big wad of cash to put down on a house is typically how you buy one. People today aren’t buying houses like they used to, and part of it is because renting is easier.

In 2014, 25 percent of middle-income earners had help from family or friends with their down payments. Only 16 percent of high, and low, income earners asked their family and friends.

A few other factors keeping young people from buying homes is higher rent, student debts, and little income growth. For the determined, they are asking for help because they still see the value in owning a home, where some do not. A concern with the market is that younger buyers won’t be able to pay their loans back, which is what happened in the housing crisis. There might be some forgiveness with family or friends, but not with banks.

This is why having a personal family bank seems like a good option for the younger generations. Their rents are high, little credit availability, crippling student debt straps them tight for cash, making that 20% quite difficult to obtain. Since home values having been rising, so have the down payments.

Be careful when taking money from a family member or friend, because it can turn ugly quickly if things don’t go as planned. 

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