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October 7, 2025

A Guide to Buying a Home with Family Help

A Guide to Buying a Home with Family Help

Buying your first home is a huge milestone, but saving for it can feel like a marathon. Between the down payment, closing costs, and other expenses, the financial bar can seem incredibly high. For many people, a little help from family can turn the dream of homeownership into a reality.

We’ll explore practical ways family can support your homebuying goals, from down payment gifts to loan partnerships. We’ll also cover the most important aspect: how to work together to protect relationships and ensure everyone’s success.

The Gift of a Down Payment

The down payment is often the biggest hurdle for first-time homebuyers, but a financial gift from a family member can make a huge difference. It can help you save faster and strengthen your mortgage application.

What Is a “Gift Letter”?

Lenders are used to this situation but have rules to keep things transparent. The money must be a genuine gift. Not a loan you’re expected to repay. To confirm this, the giver needs to sign a “gift letter,” a simple document stating their relationship to you, the exact dollar amount of the gift, and that repayment isn’t expected. Your lender will provide the form, making this an easy but essential step.

Verifying the Funds

To meet anti-money-laundering regulations, lenders will also need to see the source of the funds. Your family member may need to provide a bank statement showing where the money is coming from. To simplify things, it’s a good idea to transfer the gift money to your account a few months before applying for a mortgage. This gives the funds time to “season,” which can reduce paperwork down the line.

Loaning a Strong Credit Score: The Co-Signer

What if you have a steady income but a credit score that’s below what lenders prefer? A family member with excellent credit can help by co-signing your mortgage application, which might be the key to approval or securing a better interest rate.

What Is Co-Signing?

A co-signer uses their strong credit to support your application. While they don’t own any part of the home, they are legally responsible for the mortgage if you stop making payments. Their name and credit are tied to the loan, giving lenders the confidence to approve it.

The Responsibility of a Co-Signer

Co-signing is a big responsibility. Any late payments you make will impact their credit score as well as yours. If you default, they’re on the hook for the full debt. Additionally, the mortgage will appear on their credit report, potentially affecting their ability to qualify for loans in the future.

Joining Forces on the Purchase: The Co-Borrower

Co-borrowing is a unique way to partner up, distinct from co-signing, and it’s a great option if your income alone doesn’t qualify you for the loan amount you need. A co-borrower, also known as a co-applicant, joins your mortgage application.

Co-Borrowing vs. Co-Signing

The main difference lies in ownership. Unlike a co-signer, a co-borrower shares ownership of the home. Their name is on the property title, and their income is combined with yours to determine how much you can borrow. This can significantly increase your purchasing power, potentially allowing you to afford a larger home or a better location.

As co-borrowers, both parties are equally responsible for loan payments and share the benefits of building equity over time. This approach is especially popular in multi-generational households, such as when a parent and adult child decide to share a home.

Establishing the Partnership

Since co-borrowing involves shared ownership, it’s crucial to set clear terms from the beginning. Discuss and document how ownership will be divided (e.g., 50/50, 70/30), how responsibilities like taxes and insurance will be handled, and what the plan will be if one party chooses to sell their share. Consulting a real estate attorney can help you draft a formal agreement to protect everyone involved.

The Foundation of Success: Communication & Formal Agreements

Bringing family into your homebuying journey can be exciting, but mixing money and relationships takes careful planning. Open communication and clear agreements are key to a smooth process.

Start with Honest Conversations

Before making any commitments, sit down and discuss everyone’s expectations and limitations.

  • For Buyers: Be upfront about the support you need and realistic about your financial situation.
  • For Family Members: Clearly define what you’re willing to offer, and don’t hesitate to set boundaries to protect your financial well-being.

Put Everything in Writing

Verbal promises can lead to complications later on, so avoid misunderstandings by formalizing agreements in writing.

  • For Gifts: Lenders require a gift letter, so this step is non-negotiable.
  • For Co-Signers: Draft an agreement detailing payment responsibilities and a plan in case of financial challenges.
  • For Co-Borrowers: Create a legal document outlining ownership, roles, and an exit strategy to safeguard both your investment and relationship.

With proper planning and communication, family support can help you cross the threshold into your new home. By working together, you can navigate the process smoothly and celebrate this exciting milestone as a team.

Searching for a new home in the Pacific Northwest? We’re here to help. With communities in Idaho, Oregon, Montana, and Washington, we offer affordable homes designed to suit every stage of life. Backed by our commitment to quality, we’re ready to help you find the perfect home. Contact us today to get started!