Buying a home is difficult. Buying a home when someone is very young is all-the-more challenging. Young professionals may be able to pay the instalments of the mortgage but saving enough to make the down payment is an uphill task. When one is in their twenties or even early thirties living in the city or when expenses are reasonably higher due to various experiences that the young usually indulge in, it becomes difficult to set aside the money needed to buy a house.
The down payment is the biggest financial challenge. The second challenge is qualifying for the mortgage. There are many lenders with varying rates, the eligibility criteria would be a hurdle and the homebuyer needs to manage their finances well so they can keep making timely payments without impairing their lifestyle. Your credit history will also play a pivotal role in the mortgage preapproval and approval process.
If you are planning to buy a house, you could get your parents or a family member to make some contribution in myriad ways. You may want them to pay a part of the down payment. You may even get them have a cash gift that takes care of the entire down payment. Parents often use the equity of their large home, a second property or an unused block of land to fund the down payment of their grownup child’s home. Families could contribute whatever amount of money they can afford and whatever would be useful for your mortgage.
Another effective way to help your child is to become the guarantor. It is quite possible that your child would fall short of the credit score requirements by just a score of points or a dozen odd points. He or she may fall short by a hundred points. The income and disposable part of the income, which is considered by the banks or mortgage lenders while processing home loan applications, may not be sufficient. There can be other red flags which would become the reason for rejection. Instead of having your child’s mortgage application turned down or some criterion playing spoilsport, you can chip in as the guarantor.
Parents or family members can become your guarantor as well. Having a guarantor will increase your chances of qualifying for mortgage and almost assure you a fair deal. Shortfall in credit score will not be a deterrent. The lender will not impose high fees or unreasonable rates of interest. You would not only qualify for the mortgage but also get approved sooner and would also get a good deal, including the loan to value ratio and the rate of interest.
