Thread: Financial help in home-buying from parents

Hi forum,

Here's a long question. Thanks in advance, even if you only read it :)

My fiance and I are moving to Seattle and we're very interested in buying a house. We have well-paying jobs out there, and I have nearly 40,000 saved, but breaking into a housing market like Seattle's takes a boatload of dough, especially if we want to avoid paying mortgage insurance.

Luckily for us, her parents, who live in Seattle, are also thrilled that we're moving and, in an astounding display of generosity, have offered to "help us" with buying a house. My parents have also mentioned in the past that they would like to help us buy a house with, for example, money for a down payment.

I'm pretty sure this is a common enough situation, so I'm wondering what the options are? These are what I've come up with:

1. Parents-in-law buy entire house. Putting aside the fact that I don't think they want to buy a house entirely for us, I would imagine that the eventual transfer of ownership from them to us would carry a HUGE tax burden. The only way I could see this working would be in some rent-to-own situation in which we would essentially pay the monthly mortgage payments plus a little extra to pay down the down payment amount, but are there costs associated with such a situation?

2. Parents-in-law and my fiance and I jointly by a house. Again, I would imagine we would eventually need to buy out her parents. Common road-bumps with this scenario? To vague to really answer?

3. Parents-in-law & my parents gift us money for our down payment. I'm sure Washington state has a limit to how much a relative can give tax free lifetime or yearly, but if it were something like $10,000 from each of our four parents, that would give us a ton of flexibility.

4. Parents or Parents-in-law sign on to mortgage as guarantors of the loan. I envision this could be a stand-alone option that would help us get a better interest rate (is that even true?), but it also could work in conjunction with number 3. I have no idea what kind of mortgage rate first-time homeowners with good credit history and jobs are getting in Seattle these days, but I have to imagine that a bank would view either set of parents as even more trustworthy folks to whom to lend money. I've heard that there are some restrictions on who can be a guarantor based around current mortgage status and age. Her parents are 65 and 56 and are indeed still a few years from paying off their mortgage completely, if that plays a role.

Thank you!