Homeownership can provide a strong foundation for the future, offering greater stability, the opportunity to build equity, and the potential to create long-term wealth. But for many first-time buyers, getting there isn’t easy. High home prices, rising living costs, and the challenge of saving for upfront expenses can put buying a home out of reach — or push it further down the road.
That’s why some parents and grandparents are stepping in to help make homeownership possible for the next generation.
Military families have several options for helping the next generation achieve homeownership including providing a financial gift or lending money towards a down payment, co-signing a mortgage, or exploring VA Home Loan benefits, it is important to understand how each approach works and how it may affect your own financial future.
Why More Families Are Helping
For many young adults, saving enough money to purchase a home has become increasingly difficult. Higher home prices, rising rents, student loan debt, and inflation have made it harder to build savings for a down payment and closing costs. As a result, more parents and grandparents are stepping in to help make homeownership possible.
Family assistance can allow buyers to enter the housing market sooner, begin building equity earlier, and establish long term financial stability. At the same time, the decision should be made carefully so that helping one generation does not create financial hardship for another.
Related: More Than a Mortgage: New Benefits for Military Homebuyers
Giving Money Toward the Purchase
One of the most common ways to help is by contributing money toward a down payment or closing costs. A larger down payment can reduce the amount your child or grandchild needs to borrow and may lower their monthly mortgage payment. For buyers using a conventional loan, it may also eliminate the need for private mortgage insurance if enough equity (usually 20% or more of home’s value) is established at closing.
Lenders typically require documentation showing that the money is a gift and does not need to be repaid. Families should also understand the current IRS gift tax rules before making a large financial gift. While many gifts do not result in taxes being owed, larger gifts may require filing IRS Form 709 even though no immediate tax is due. Speaking with a tax professional before making a significant gift is always a wise step.
Lending the Money Instead
Some families prefer to structure their assistance as a loan rather than a gift. This approach allows parents or grandparents to help with the purchase while expecting repayment over time.
A properly documented family loan can benefit both generations, but it should be structured carefully. The IRS generally requires family loans to charge at least the Applicable Federal Rate to avoid unintended tax consequences. Working with a tax advisor or attorney can help ensure the arrangement complies with current requirements.
Related: Top VA Home Loan Questions Answered
Should You Co Sign?
Co-signing can help a buyer qualify for financing if they have limited credit history or insufficient income. However, becoming a co-signer also means accepting legal responsibility for the loan.
The mortgage becomes part of the co-signer's credit profile and may affect future borrowing capacity. If the primary borrower cannot make the payments, the lender can require the co-signer to do so. Before agreeing to co-sign, families should consider whether taking on that obligation fits comfortably within their own financial plans.
Buying a Home Together
In some situations, parents and adult children choose to purchase a home jointly. This arrangement can work well for multigenerational households or when both parties want to share ownership and financial responsibilities.
Before moving forward, everyone involved should have a clear understanding of ownership percentages, maintenance responsibilities, future refinancing decisions, and what will happen if one owner wants to sell. Having these conversations in advance and documenting the agreement can help prevent misunderstandings later.
Related: Download our Homebuying Guide
Understanding VA Home Loan Opportunities
Military families may have access to one of the most valuable home financing programs available through the Department of Veterans Affairs. Eligible servicemembers, Veterans, and qualifying surviving spouses may qualify for a VA Home Loan that offers significant advantages over many conventional financing options.
Because VA Home Loans often require no down payment, many military families find they need less financial assistance to purchase a home. Instead of helping with a down payment, parents or grandparents may choose to assist with closing costs, moving expenses, home furnishings, emergency savings, or future maintenance costs.
It is also important to understand that the VA Home Loan is intended for homes that the eligible borrower plans to occupy as a primary residence. A Veteran generally cannot use a VA Home Loan simply to purchase a home for an adult child who will live there independently. Speaking with a mortgage professional who understands VA lending can help families determine the best approach.
Think Beyond Closing Day
Purchasing a home is only the beginning of the financial commitment. New homeowners should also prepare for property taxes, homeowners insurance, utilities, maintenance, and unexpected repairs.
Helping your child or grandchild develop a realistic household budget may be just as valuable as providing financial assistance. Establishing healthy financial habits early can contribute to long term success as a homeowner.
Protect Your Own Financial Security
Wanting to help your family is understandable, but it should never come at the expense of your own financial well being. Before making a substantial gift or taking on additional debt, consider how the decision may affect your retirement savings, emergency reserves, and future financial flexibility.
Many financial professionals recommend evaluating your own long term plan before committing to a large financial contribution. Understanding the impact today can help prevent difficult financial decisions later.
Helping the Next Generation Succeed
Every family's situation is unique, and there is no single solution that works for everyone. Some buyers may benefit from financial gifts, while others may be better served through a family loan or by taking advantage of the benefits available through a VA Home Loan.
Working with a mortgage professional who understands the unique needs of military families can help you explore the available financing options and determine the approach that best supports your family's goals. With thoughtful planning, you can help your child or grandchild achieve the dream of homeownership while protecting your own financial future.
We’re Here to Help
Thinking about buying, ready to start home shopping in earnest, or considering a refinance? An AMS Military Mortgage Advisor, a licensed mortgage loan originator, will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.
Ensuring Armed Forces Mutual Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!