Here's a recent article from the LA Times sharing some interesting numbers about First time home buyers. In my daily business, i see a lot of gift funds from family members for first time buyers. Most FTHB in the Sacramento market have a good job with solid income but do not have the downpayment saved up.
Finding ways to help young adults make their first home purchases
Source: LA Times
Stricter mortgage underwriting standards, higher unemployment, and heavy student debt are among the key factors that stand in the way of many potential buyers in their 20s and 30s. But first-time home buyers in this age group may be able to turn to effective techniques that family members, friends, and even employers can use to bridge the generational gap by offering a helping hand.
Making sense of the story
- · Americans who were 30 to 34 in 2012 had the lowest homeownership rate of any similarly aged group in recent decades at 47.9 percent.
- · In comparison, Americans born between 1948 and 1957 had a 57.1 percent ownership rate by the time they hit the 30-to-34 bracket. This is despite record low mortgage rates and bargain-priced foreclosures and short sales.
- · According to one industry estimate, 27 percent of first-time buyers last year received gift money from relatives to help defray the down payment and closing costs.
- · With professional help, some family members are providing either second mortgages or first mortgages, and properly structured, these loans provide annual returns to family members well in excess of money-market funds or bank deposits.
- · Money provided as a loan cannot be disguised as a loan. If the money is a gift, there needs to be a formal letter making the purpose of the gift explicit and the specific transaction for which it is to be used. Documentation is also needed to attribute the source of the funds and the capacity of the gift giver to provide the money.