First time home-buyer questions

jmmom
Sun, 05 Feb 2012 22:53:01 +0000

It seems that it might be premature at his age and stage in starting his career, even though it means he might miss out on possible appreciation (of course, he might miss out on a further real estate melt-down if that is even possible).

I just want to state that, as DrGoogle states, this has been done and can be done. Years ago, I was a successful broker in Silicon Valley. This was not unusual and the “rubrics” for doing it were out there; I assume they still are:


The buyers need a well-constructed contract between themselves, by a good real estate attorney, which covers all of the bases: % of ownership, formula for shared expenses, arrangements for buyout if one partner wishes out, whether one partner can force a sale in that event or not, whether one partner can sell his % to a third party… and on and on and on.
(Note that I have not been active in the current lending environment, so could be a bit off on this) Qualifying for a loan: in general, the buyer(s) cannot borrow the down payment. It can come as a gift from a family member, but not a loan, so your idea of lending his share of the dp wouldn’t work. Of course, if the friend has the downpayment needed to qualify for the mortgage from the lender’s point of view, this may not come into play; however:
There were (are?) Shared Equity (maybe going under a different name) arrangements. Typically this is between parent and adult child, where adult child has the income to support the mortage and other ownership expenses, but not the down payment. Parent supplies most/all of the down payment. There are contracts for this setup also, specifying how equity appreciation will be handled. Typically, the parents are more investors than owners and will benefit from a portion of the appreciation while not actually being co-owners with the “kids.”


I’m rusty so some of the details may not be right, but the options are out there. Not saying now is the right time, just that it can be done and there is expertise out there to help set it up properly if someone wants to do this.