In Chicago, parents often help with housing payments
Are you helping your children with rent or mortgage payments? Maybe you gave your children a financial gift to help them cover the down payment on a condo or single-family home in Chicago. If so, you’re not alone.
A recent story by the Chicago Tribune found that Chicago ranks as one of the top cities in which parents help their children with housing payments.
This isn’t surprising. Chicago is not an inexpensive place to live. Both mortgage payments and rents here can be high. Young people might be struggling with high student-loan payments each month. They might still be working jobs that provide lower salaries.
Because of this, younger buyers – especially first-time homebuyers – often struggle with coming up with enough money for a down payment. They might also struggle to cover the closing costs associated with a mortgage loan or even their monthly mortgage payments.
This isn’t a trend that appears to be waning, either. It’s not as if housing prices in Chicago appear ready to fall. Throughout last year, prices tended to rise each month for Chicago condos or single-family homes. Young buyers, then, might need help from their parents for a long time.
There are some rules parents need to follow if they want to gift their children funds for a down payment. First, the money they give to their children must indeed be a gift. They can’t ask their children to repay it. That would be considered a loan, and mortgage lenders must count loans as debt.
Parents must also write a gift letter stating how much money they are providing and that this money is a gift and not a loan.
If you do want to gift your children money for a down payment, make sure to talk with the mortgage lender working with your children. You want to make sure that you follow all the rules. Otherwise, your gift might fall through.