In fact, more than 20% of current transactions involve the parents backing their adult children, typically with the parents as primary mortgage holders.
“We have seen all sorts of parent assisted transactions over the last year” explains Toma Partners broker, Ben Toma. “The adult children have often lost a home through a short-sale or foreclosure. They can make a house payment but don’t have the credit to buy so the parents back them. We see some involvement of parents in more than 20% of the transactions we handle.”
The most common occurrence is for parents to purchase a home outright for the children who then rent or rent-to-own from their parents. This arrangement provides a stable investment income for the parents and reliable landlords for the children.
Low Phoenix home prices in comparison to rents is also prompting some parents to purchase first time homes for their stay-at-home kids. Financially savvy families see the current market as a perfect time to build a legacy for their kids, helping them get their first house at an affordable price.
Research with several Phoenix area mortgage professionals confirmed the same trend. Jim Hutelmyer of Suburban Mortgage in Phoenix states the parent buying trend “is a LOT more common.” According to Hutelmyer, most conventional lenders now offer an option for a “non-owner occupied primary residence.” These loans are specifically catered to situations where a family member can go in on the loan to help the person who is going to live in the house qualify. Almost 100% of the time it is a parent or grand parent or both going on with the adult child.
Toma Partners,LLC is a Phoenix-based luxury residential real estate company with offices in the Biltmore area of Phoenix, specializing in short sales, investment properties and bank owned properties, and offers expert home staging. For more information contact Mike Garland at (602.954.2000) or visit www.TomaPartners.com.
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