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Helping your child achieve the dream of homeownership

Rising rents, housing costs, inflation, and student loan debt continue to make it difficult for many young adults to save for a down payment, leading more families than ever to help their children purchase a home.

You remember what it was like to buy your first house. The excitement and nerves that went along with such a big purchase. And the memories you created that turned your house into a home. You want your children to experience homeownership as well — and they do too — but it's increasingly challenging to make that dream a reality in today's economic climate.

The American dream persists despite challenges

Most Americans – 75% – consider homeownership part of the American dream, according to a survey by Realtor.com.1  The survey also found that 64% of Americans name home ownership as one of their life goals, while 50% believe that home ownership is necessary to long-term wealth.

While most Americans believe that homeownership is part of the American dream, it differs across generations. Baby boomers feel the strongest as 84% of respondents believe that homeownership is integral to the American dream. In contrast, 74% of Generation X respondents felt this way, followed by 69% of millennials and 67% of Generation Z.1

Student debt is an obstacle

Student loan debt remains one of the most significant barriers to homeownership for younger generations and forces millions of young people to delay the purchase of their first home. Since 2005, homeownership among recent college graduates has declined by 1.8 % for every $1,000 of their student loan debt. 2

The rising cost of homeownership

With or without student loans, homes remain expensive and increasingly difficult to afford for many aspiring first-time homeowners. According to data from the U.S. Census Bureau and the National Association of Realtors, the median home price for a new home in the first quarter of 2025 reached was $416,900, compared to $402,300 for an existing home.3

While mortgage rates have moderated slightly, they are still significantly higher than the historically low rates seen in 2021, adding hundreds of dollars to monthly payments for typical homebuyers.

Parents are stepping in

That's why many parents—who are financially positioned to do so—are increasingly helping their children with down payments for conventional loans. More than one-third (36%) of Gen Zers and millennials who plan to buy a home soon expect to receive a cash gift from family to help fund their down payment, according to a survey commissioned by Redfin and conducted by Qualtrics in February 2024.

They also found that young homebuyers are receiving help from family members in other ways. Roughly one in six (16%) Gen Zers and millennials say they’ll use an inheritance to help fund their down payment, and 13% plan to live with their parents or other family members. 4

Here are several ways to help your children with homeownership:

Contribute to the down payment

Helping your child reach a 20 percent down payment will save them money in multiple ways, most notably securing a better interest rate on the loan and avoiding private mortgage insurance (PMI). Gifting this money to your children while you're still alive can reduce potential estate taxes later and allows you to enjoy their appreciation and time spent in their new home.

Provide an intra-family loan/private loan

If you prefer a more structured approach, consider providing a formal loan. Ensure you create a legal document outlining the terms and a payment schedule—ideally with the help of a real estate attorney.

You'll need to set an interest rate at least as high as the minimum rate set by the IRS, known as the Applicable Federal Rate (AFR). This rate is typically lower than the best mortgage rates available from financial institutions.

Should you wish to forgive a portion or all the loan in the future, you can do so. However, consider potential income tax implications for both you and your child. In most cases, forgiving an intrafamily loan is considered a gift, but you may want to wait until the loan balance falls below the gift tax threshold to avoid impacting your lifetime gift and estate tax exemption.

Co-sign a mortgage

If your child cannot qualify for an adequate loan independently, co-signing their mortgage application may increase their chances of approval. However, this approach carries significant risks and will affect your credit score and debt-to-income (DTI) ratio. This elevated DTI could negatively affect your borrowing potential and financial flexibility. Many financial experts recommend avoiding this option when possible.

Plan ahead

If your child aspires to homeownership, encourage early planning. Emphasize the importance of saving consistently and building a strong credit score. When they begin their home search, guide them toward properties they can realistically afford, which might require exploring different neighborhoods or even locations.

While you naturally want the best for your child, you must balance their needs with your own financial security, particularly as retirement approaches. Work closely with your financial advisor, tax professional and attorney to navigate both the financial and emotional aspects of helping your child achieve homeownership in a way that benefits everyone involved.

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  1. Brooklee Han, “Most people view home ownership as part of the American dream,” Housingwire, January 14, 2025
  2. Melanie Hanson, “Student Loan Debt and Homeownership,” Education Data Initiative, January 7, 2025
  3. Price Gap between new and existing homes remains narrow in 2025,” National Association of Home Builder, May 7, 2025
  4. Dana Anderson, “Nepo-Homebuyers: More than one-third of Gen Z and Millenial homebuyers plan to use family money for a down payment,” REDFIN News, March 27, 2024

This is a general communication for informational and educational purposes. The information is not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. If you are seeking investment advice or recommendations, please contact your financial professional.

This information is a general discussion of the relevant federal tax laws provided to promote ideas that may benefit a taxpayer. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. Taxpayers should seek the advice of their own advisors regarding any tax and legal issues specific to their situation.


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