Rising housing costs have complicated saving for a and qualifying for a mortgage for many young adults. Parents often step in to help. Parents can offer support with simple down payment gifts, but additional options include co-borrowing or cosigning, buying a home for an adult child, or dividing ownership. All of these approaches can make it possible for the next generation to own a home, but may create mortgage, tax, estate and relationship complications.
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Parents Are Helping Adult Children Buy Homes
More than 20% of first-time homebuyers used a gift or loan from a friend or relative for their down payment in 2025, according to a .
Parental assistance for homebuying isn’t new, but parental support may increase when housing and credit conditions tighten. The share of ages 25 to 34 with a co-borrower 55 or older has increased sharply from 0.6% in 2000 to 2.5% in 2023.
“The ‘Bank of Mom and Dad’ has always existed, but it’s evolved,” says Matthew Sanford, assistant vice president of mortgage lending at Skyla Federal Credit Union. “It used to mean help with the down payment. Today, the bigger hurdle is qualifying for the mortgage.”
Higher prices mean larger down payments and closing costs. can make it more difficult to qualify based on income. Down payment gifts can help with cash to close, but don’t solve income qualification problems. That may push parents beyond gifting into co-borrowing or ownership, in part or in full.
Ways Parents Can Help Adult Children With Home Purchases
Parents who want to help adult children buy a home have several options:
— Gift money for the down payment, closing costs or financial reserves. This is often the most straightforward option because the parents don’t assume mortgage responsibility or accept payments from the child.
— Make a family loan. Mortgage lenders must know about the loan, as payments may be included in the child’s . A written loan agreement should detail the amount, interest rate, payment and repayment term.
— Cosign the mortgage. Cosigning helps children qualify using the parents’ income and credit but doesn’t grant an ownership interest. Parents are fully responsible if the child stops paying, and can damage both parties’ credit.
— Co-borrow the mortgage. Parents as nonoccupant co-borrowers allow the lender to consider the parents’ finances for mortgage approval.
— Share ownership. Parents may purchase the home with children and divide ownership based on financial contributions.
— Buy the home and rent it. Parents may buy the home and allow the child to live there as a rent-paying tenant. Later, parents may sell the property to the child, gift some of the equity or transfer ownership in an estate plan.
Families should detail agreements with ownership percentages, expenses, appreciation, future sales and buyout rights.
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Parent Help Affects Mortgage Underwriting, Taxes and Estate Planning
Undisclosed family loans can complicate mortgage underwriting. Mortgage lenders need to know the source of all funds, so parents and children should be ready to provide documentation. For example, parents who gift funds will likely need to provide a signed confirming that repayment isn’t expected.
“Everyone should agree in writing on whether the money is a gift or a loan, who owns the property, who is responsible for repairs and expenses, what happens if someone wants to sell,” says Ralph DiBugnara, divisional senior vice president at New American Funding. “If parents will have an ownership interest, there should also be a plan for what happens if one party passes away or relationships change over time.”
Parents cosigning or co-borrowing should expect to provide standard mortgage documentation, including bank statements, income documents and credit reports.
The federal annual gift tax exclusion is $19,000 per recipient. Two parents can generally give $38,000 to a recipient using both exclusions. Gifts above the annual exclusion may require filing a federal gift tax return.
Families providing loans should consult tax professionals to determine whether they need to charge at least the applicable federal rate and report interest income.
Parents taking an ownership share may affect capital gains tax when the home is sold. There can also be complications with estate administration, creditors or and whether siblings inherit part of a parent’s ownership interest.
“Think ahead: Your child probably doesn’t want to suddenly be splitting ‘their’ home with siblings — or a step-parent — just because nobody wrote down how it should be treated,” Sanford says.
How to Help Adult Children Without Risking Your Retirement
Helping a child buy a home shouldn’t come at the expense of a parent’s retirement or or interfere with their own housing security. Parents should consider whether the money is genuinely available, fairness among siblings and what happens if the child can’t make payments.
“Cosigning and co-borrowing come with real risk for the parent,” Sanford says. “That debt shows up on their own credit and can complicate any borrowing they need to do themselves.”
Alternatives can include:
— Allowing adult children to live at home while saving
— Sponsoring financial counseling
— Gifting a smaller amount that doesn’t jeopardize finances
“The biggest question shouldn’t be ‘Can I help?'” says Michael McAuliffe, president and founder of Family Credit Management. “It should be, ‘How much can I help without hurting my own future?'”
McAuliffe says he’s seen parents sacrifice their financial security to help their children buy homes, only to face unexpected financial struggles.
“Kids can borrow for a home,” says McAuliffe. “Their parents can’t borrow for retirement.”
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