If you're wondering how to buy your parent's home, the process might be easier than you'd imagine and your parent might be more open to the idea than you'd guess.
Many people today live with their parents, grandparents or both. These arrangements, known as multigenerational housing, have become so common they're even trendy. But you don't have to live with your parents to buy their home.
With that in mind, here's a step-by-step guide for how to buy your parent's home:
1. Discuss the Idea with Your Parents
Families today are more interdependent than they have been in recent decades, though multigenerational housing isn't actually new. Look back 50 years or more, and you'll find that many families chose this lifestyle. Setting up a family homestead can mean more convenience and lower housing costs for everyone you love, if you like this arrangement.
2. Figure Out Your Down Payment
Saving a down payment can be difficult for first-time home buyers. If you don't have much cash and your parents aren't in a position to give you the money, they might be willing to provide a so-called gift of equity, which would allow you to buy their home with a very small down payment or even no down payment. The equity is their value in their home.
3. Apply for a Mortgage and Research Closing Costs
If your parents have a mortgage, you'll need to get one yourself to pay theirs off when you purchase their home. You'll need to qualify for the loan and you might have to pay some closing costs. You can lower your costs if you accept a higher interest rate. Your parents can lower their costs if they sell their home to you without a realty broker.
4. Decide on a Purchase Price
Sales prices of comparable homes that were sold in the last six months are a good guide as to how much your parent's home is worth. You'll also need an appraisal as a condition of loan approval and that will give you more information about the home's market value.
5. Structure the Deal
Another way to take over the ownership of your parents' home is to ask them to add your name to the title, make their mortgage payments yourself for at least one year, refinance the mortgage into your name and then remove them from the title.
6. Get Legal Advice
You and your parents should talk to legal and financial advisers, such as an attorney, financial planner or accountant, before you buy their home because there can be tax and inheritance issues. If you have siblings, they might need to be part of the conversation as well. Put your agreement with your parents in writing to make sure everyone is clear about and on board with the details.
7. Set a Date
Once you own your parent's home, you'll be responsible for the home maintenance and repairs. Be sure you're comfortable with these costs before you move forward. You'll also want to talk about whether your parents will continue to live in the home with you and your family. They might want to move out into a new separate home of their own.