Parents are drawing heavily from their own financial reserves to help their adult children become homeowners, according to a study published by Legal & General Group, a multinational financial services company. The study summarizes the level of home buying help as follows:
“If families were considered a financial institution, the “Bank of Mom and Dad” would be the seventh largest mortgage lender in the country.”
Just to put that in perspective, the volume of family money involved in U.S. home purchases ranks up there with likes of Bank of America, Flagstar Bank and loanDepot, which produce tens of billions of dollars in loan origination. The “Bank of Mom and Dad” has kicked in roughly $47 billion dollars towards home purchases nationwide.
The study finds that family help was involved in about 1.2 million home purchases, with family contributions averaging $39,000 per transaction. 43% of home buyers under age 35 received family assistance for their home purchase. The driver behind the trend has been the relentless rise of home prices in recent years, along with rising rental costs, and a dearth of affordable home inventory.
Chicago has been one of the more affordable real estate markets in the country, but coming up with a down payment is a common first-time buyer challenge. It’s one of the reasons we list Chicago area down payment assistance programs on our website, and explain the importance of financial preparedness in our free home buying seminars.
If you are expecting – or hoping – to receive help from family for your Chicago home purchase, be sure to discuss the rules for cash gifts with your mortgage lender in advance. While cash gifts are allowed for FHA and Conventional mortgage down payments, there are specific guidelines about how this money must be documented and handled.
StartingPoint Realty – serving first-time home buyers since 2004!
StartingPoint Realty proudly serves first-time home buyers throughout Chicago and the Northwest suburbs. Get an introduction to home buying by attending our free home buying seminar! Space is limited, so please register your choice of location and date to reserve your seat!
Always feel welcome to contact us for help with your Chicago home buying questions!
Ryan Gable Broker/CEO Starting Point Realty
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