Helping Someone Buy a Home (Video Transcription)
Hi everyone, it’s George Belleville here with the Head for Home team of the KW Collective. I’m making this video because I want to talk about a topic that comes up a lot. I just had this conversation again with someone this week, and that is helping someone else buy a home.
This situation arises often, usually with parents or older family members stepping in to assist. There’s a lot to think about, and we’re going to cover some of the key considerations in this video. In future videos, we’ll dive deeper into the details. Here are some things to keep in mind:
- Financial considerations
- Legal considerations
- Family considerations (e.g., fairness among siblings)
- Psychological considerations
This process can be stressful and complicated, especially when fairness and family dynamics come into play.
At the Head for Home team, we use our PATH approach for everything:
- Plan
- Assess
- Take Action
- Head for Home
Often, “Plan” and “Assess” work together in a loop because as you assess, you may need to adjust your plan.
There are two plans you need when helping someone buy a house:
- A plan for the purchase – What kind of house to buy, budget, and steps to close.
- A plan for how you’re going to help – This includes discussing your role, the financial support you’ll provide, and how it will be structured.
Plan
It’s crucial to plan well in advance. Many times, buyers realize too late that they need help, leading to last-minute decisions that create stress. Early conversations can open up better options.
Assess
When assessing, consider:
- The buyer’s situation: Savings, loan qualification, and needs.
- Your own ability to help:
- What kind of support can you provide?
- What is your risk tolerance?
- Are there potential tax implications?
For example, I’ve seen cases where parents wanted to withdraw money from a retirement account without realizing the significant tax and penalty costs involved.
Take Action
Once the plan is set, it’s time to take action:
- For the buyer: Determine what they want, start looking at houses, and secure financing.
- For the helper: Implement the financial strategy, which might involve transferring money, consulting with financial advisors, or preparing for lender scrutiny.
Keep in mind that lenders will want to see where the money is coming from and may require documentation. Surprise funds near closing can lead to delays.
Head For Home
This phase involves everything from contract to close:
- Finalizing the financing
- Completing the purchase
- Handling any final lender requirements
In summary, helping someone buy a home involves many layers, including tax, legal, and financial considerations. Planning and communication are key to making this process smoother and less stressful for everyone involved.
We’ll cover more details in upcoming videos, but if you’re ready to start the conversation now, don’t hesitate to reach out. Our team is here to help!