The Savings and Loan of Mom and Dad

July 21, 2011


As most practioners in Real Estate know, financing is harder to obtain and can be more expensive than it first appears.Lenders have tightened underwriting guidelines and have upcharges for everything from nicks on credit, insufficient amounts of downpayment, or type of property being purchased(ie. condo, second home, recreational property or investment property).
Worthy buyers are being denied mortgages because of new regulations. Lenders are more discriminating regarding the buyer’s downpayment. Some have been denied a loan because their source of funds could not be verified to the lender’s satisfaction. Recently, a widowed buyer was denied a loan because her downpayment source came from the sale of gold coins worth over $100,000 willed to her by her husband.

Obviously, there are good prospects out there who can’t get financing. An alternative to traditional financing that is becoming popular again is getting a mortgage from the Local Savings and Loan of Mom and Dad. This could create a win-win situation for parents whose children  are finance-worthy but have been denied because of some underwriting red tape. Let’s say the kids need a loan of $100,000 and their parents have money in CD’s getting 1% or 2% interest.The buyers could get a $100,000 mortgage from their parents and pay them 5%  interest instead of the bank.The kids get into a house and the parents get a better return on their money then they had been getting from their certificates of deposits.


According to the National Association of Realtor’s,  housing affordability is the most favorable in 2011 since record keeping began in 1970. Most likely the homes purchased now will be worth more in a few years.The home could be refinanced in a few years and the parents could be payed off if they wanted to be, although they may not want to be. What greater  financial gift could you give your children than a home purchased  in this market.


Written by Mike Korol, General Sales Manager, First Weber’s Metro South office
If the idea above would fit into your situation, please take a look at all the affordable property for sale in Wisconsin by searching

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