Down payment help from a parent vs. co-sign mortgage?

Question

If a generous parent wanted to help out with a first property, can/should they co-sign the mortgage? Or if it is down payment help, is there a particular way banks like to encounter that? Does it need to be seasoned, etc. Thanks!

Account Closed · Answer

Lend but do not co-sign. Seasoning depends on the bank. You can gift money that is put into their bank account and usually after 90 days it's good. If you lend the money the bank will count the payments against their Debt to Income Ratio. If you co-sign, well . . . don't. Too many complications, tax, family, legal, inheritance, etc.

Eric Veronica · Answer

@Will Reynolds gifts from parents are allowed with no seasoning for most owner occupied mortgage programs.

Investment property is a different story.  Usually not allowed.

Saravanan Saravanan · Answer

@Will Reynolds

As a personal suggestion; it is better not to involve parents for co-sign.  If things go bad; elder folks would be bigger trouble.  Due to younger age; may be consider build additional income or wait for couple more years.

Rick Momsen · Answer

Gift funds are used all the time for down payments, it just has to be from family. It typically doesn't have to be seasoned but does have to be sourced. I'd recommend having the parents wire the funds directly to the title company that way there's far less sourcing needed and bank statements required.

I rarely recommend co-signing unless there's some shared equity and payments. Solid financial footing on both parties and a history of on time payments.

Down payment help from a parent vs. co-sign mortgage?

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