It seems that every year it becomes a little more difficult for young adults to come up with the down payment they need to enter the real estate market. As a parent, you may want to help out your kids and put them on the path to home ownership early. If this is the case, you also need to make sure that you are prepared financially to take this step and that you are doing it for the right reasons.
Now, more than ever, parents are interested in helping out their children due to the low interest rates that are available. The overriding rule that needs to be followed though is that parents should only help out their children with a home purchase when they are set up for their retirement and are able to handle their own needs. Taking money from the retirement fund should never be considered unless there is an excess amount in it.
Co-signing for a mortgage
Any parent that is co-signing for a home loan should be in a financial position where he can take over the payments should something unfortunate happen. This is life, after all, and while it would be nice to see your children making their payments month after month without a problem, emergencies can strike when you least expect them. Never co-sign for a mortgage unless you can meet these mortgage payments yourself - if need be.
Why can't your children get a mortgage?
Take a look at the reasons why your child cannot take out his own mortgage. Perhaps there are good reasons behind it but sometimes it just all boils down to a lack of financial responsibility on the part of your child. If your loving son, for instance, has a bad credit history because he defaulted on his credit card payments, you may want to think twice about getting involved. There's a good chance that history will repeat itself and he won't be able to carry through on his mortgage payments as promised. Perhaps tough love is in order here. You may want to let your son know that he needs to become more responsible with his money before you would consider helping him out with a home purchase.
When you're deciding whether you want to give your kids a hand you really need to examine your own financial situation and the reasons behind giving them this added help. In the worst-case scenario you could leave yourself short for your own retirement and your child could lose his house due to poor money management. In the best case scenario you could be financially set up for your golden years and your child could be enjoying all the benefits and freedom that go along with home ownership - especially now when the interest rates are so low!