Buying a first home is a big milestone—and a great family project! With a few simple steps, parents can help adult children feel confident, prepared, and excited about the upcoming purchase of their home.
Following these steps will set up a “smooth sailing” process when the time is right:
1. Build credit the slow and steady way
- Check reports together: Review all three bureaus and clean up errors.
- Pay on time, every time: Autopay and reminders keep things easy.
- Keep balances low: Lower credit card utilization can lift scores.
- Pause new debt: Avoid new accounts or big purchases before applying.
- Keep long‑time accounts open: Credit history length helps.
- Add smart boosts: Consider authorized‑user status on a well‑managed card or rent‑reporting services where accepted. *However, keep in mind that if less than 4 tradelines have been opened in the child’s name ONLY, then the authorized user status may need to be removed at the time of application*
- Celebrate progress: Credit improves with consistent habits—small wins add up!
2. Save for the down payment and closing costs
- Set a clear goal: In addition to the down payment, plan for closing costs and prepaids (often about 2%–5% of the price).
- Create a dedicated fund: Open a separate savings account and automate transfers after payday.
- Funnel windfalls: Tax refunds, bonuses, and gifts can accelerate the plan.
- Keep a cushion: An emergency fund and required “reserves” help ensure smooth homeownership.
- Mind the “seasoning”: Lenders usually review the last two months of statements—avoid large unexplained cash deposits.
- Family gifts are welcome: Many programs allow gift funds with a simple gift letter and proper documentation. A quick chat with a tax professional helps with any gift‑tax questions.
3. Explore first‑time homebuyer programs
Availability and eligibility vary, but these favorites are worth a look:
- Conventional low‑down‑payment options (e.g., Fannie Mae HomeReady, Freddie Mac Home Possible)
- 0 down payment programs exist with certain lenders
- Some Lenders (including First Horizon Bank) offer forgivable grants for down payment and closing cost assistance
- FHA loans (as low as 3.5% down, with flexible credit guidelines)
- VA loans (often 0% down for eligible service members, veterans, and certain surviving spouses)
- USDA loans (0% down in eligible rural/suburban areas with income limits)
- State and local housing finance agency programs (down payment/closing cost assistance, grants, or forgivable loans)
4. Helpful ways parents can support beyond cash
- Co‑borrower or co‑signer: Can strengthen an application—just be sure to discuss responsibilities and an exit plan.
- Points and buydowns: Covering discount points or a temporary buydown can reduce the payment.
- Ask for seller credits: In the right market, credits can offset closing costs.
- Gift of equity: If selling a family home, some programs allow equity to count toward the down payment.
5. A smooth‑sailing checklist
- Get pre‑approved early (6-12 months before the purchase) to set a firm, realistic budget.
- Keep income and employment steady during the process.
- Avoid opening new credit or making large purchases after pre‑approval.
- Gather documents in advance: Pay stubs, W‑2s, tax returns, bank statements, and ID.
- Communicate quickly about any changes—surprises are for housewarmings, not underwriting.
Next steps for smooth sailing:
Meet with a mortgage professional that fits your needs for a personalized plan, including payment estimates, total costs, and the best program fit for their goals. Program rules and availability change over time, and eligibility depends on credit, income and property location. It is best to stay in contact with your mortgage professional to discuss any program or qualification changes.
