Bank of Mom and Dad
While the financial obligation of being a parent technically expires once your offspring becomes a legal adult, it doesn’t always work out this way. In fact, 1 in 5 people in their 20s and early 30s lives with his or her parents. What’s more, 60 percent of all young adults receive financial support from their parents. This is a significant increase from a generation ago, when only 1 in 10 young adults moved back home and few received financial support.
So, why are so many Millennials returning to the nest after getting a taste of what the real world has to offer? To put it bluntly, the economy sucks. Nearly 45 percent of Millennials have crippling student loan debt, and more than half are unemployed or underemployed. With so many young people struggling to keep their heads above water, saving up for a down payment on a house seems more like a fantasy than an achievable goal.
Unsurprisingly, new research reveals nearly half of first-time homebuyers need financial help from their families to make their dreams of homeownership a reality. However, the process of approaching your parents and asking for a loan can be risky business. You may be wondering if it’s even possible to tap the bank of mom and dad while keeping the peace. It depends on your family dynamics, but we say it’s totally doable. Here are a few tips:
1. Talk to your parents in person. This is definitely not a conversation you should have over text, email, or even the phone.
2. Get prequalified for a mortgage. If a lender has faith in your ability to become a homeowner, your parents might have faith as well.
3. Hire a buyer’s agent. Having a professional on your side will help your parents see that you’re serious and prepared to buy a home.
4. Involve your parents in your home search. Parents love feeling included in their kids’ lives. They might even have some advice based on their own experiences.
5. Be honest about your financial needs. Even if you earn a high income, pressing demands might make it tricky to save up for a down payment. If you can explain that interest rates are low and home prices are affordable, your parents will be more likely to agree that now is the time to buy.