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.