Millennials Search for Unconventional Down Payment Funds, but at What Cost?

Rising home prices are standing in the way of millennials who want to buy their first home; however, these challenges are being overcome via some unconventional methods. Millennials are getting creative and finding sources for their down payment by any means necessary. But are these methods hurting the millennial generation financially?

Borrowing from family: Sure, gifted money doesn't sound bad. But what if the families don't have the cash to give? Instead, some buyers are asking that their parents' home be refinanced, using the home equity as a way to fund their own home purchase.

Of course, this can be beneficial in multiple-offer situations to get a competitive edge with an all-cash offer, but borrowing from a relative can go south fast. Not being able to pay a bank back can have repercussions like lowering a credit score, but missed payments to a relative can damage familial relations. Is it worth the risk? Also worth mentioning is the fact that most lenders require that gift money is expressly not a loan that will be paid back, but is a true gift with documentation stating that this is not a loan.

Crowdfunding: There are new crowdfunding platforms being introduced every year, and more of them are tapping into the real estate industry. This can be a great way to amass gifted money from friends and family, but not everyone may see it that way. Instead of crowdfunding for their honeymoon, newlyweds are asking their wedding guests to donate toward their first home. This method can get complicated in the lending world. Buyers will need to look into gifting regulations before accepting any gifted money.

If you would like help navigating the process to finding and closing on the right home give us a call. 336-265-7253