Before you help your kids buy a home, read this first

I recently attended a neighborhood potluck where there were four married couples and eight widows. Our hostess asked each of us to share what motivated us to move into our community, plus what we did career-wise before we moved here and what we’re doing now.

When I mentioned my work at Profit.RealEstate helping first-time buyers into their homes and building wealth through real estate investing, seven different women wanted to have me explain how to help their kids and grandkids buy a home.

While both The New York Times and The Wall Street Journal have covered this trend, no one has fully addressed how agents can help this massive group of potential first-time buyers. 

The conversation we need to have with our clients

When a buyer purchases a home, almost everyone talks about the down payment and closing costs like that’s all the cash you will need to close the transaction. As a result, buyers are often woefully unprepared when they are forced into a mortgage escrow account that requires them to fund as much as a full year of private mortgage insurance (PMI), property taxes and homeowner’s insurance at closing. 

A 2026 study by Clever Real Estate and Best Interest Financial surveyed nearly 1,000 recent homebuyers and found some startling facts. Beyond their down payment, buyers spent an average of $31,502 on upfront homebuying expenses, nearly four times the $8,083 they expected to pay.

First-time buyers spent even more, averaging $36,460. Moreover, 75 percent of survey respondents said the additional costs negatively impacted their finances during their first year of homeownership.

Clever breaks down where that $31,502 actually goes: 

• Repairs and improvements in the first year: $15,073
• Concessions to the seller: $7,678
• Closing costs: $5,719
• Moving costs: $3,032

Clever also cited several additional problems: 

• More than half of buyers went over budget.
• Close to one third reported their home inspector missed problems that turned out to be costly. 
• 73 percent said that had they known about these additional costs, they would have made different decisions. 

What parents and grandparents need to know about the real costs 

As agents, we need to inform our clients of all ages to expect additional costs over and above the down payment. When parents and grandparents help their kids get into houses, and they fail to account for all these additional costs during the first year, they run the risk of negatively impacting not only the kids’ financial stability, but their own as well. 

Consequently, before parents or grandparents decide to help their kids buy a house, they need to build a detailed budget first that includes repairs, furnishings, property taxes, insurance, HOA dues, utilities, moving costs and a cash reserve for the unexpected.

If the parents or grandparents are funding only the down payment, as an agent, you need to ask them and their kids who covers the rest if something goes wrong during the first year? 

10 issues families must address before purchasing 

For most buyers, the first person they consult about how much a home will cost is a real estate agent. This means you may be the only person who can and will raise the hard questions above before emotions take over the buying process.

Here are 10 additional issues worth addressing before anyone writes a check. 

1. The first question parents must ask: Can we actually afford to help? 

This means looking at their retirement savings, emergency reserves, healthcare needs and long-term care planning. Will this gift negatively impact the giver’s health and financial security at a later date? 

2. Agents should make sure everyone understands the true cost of homeownership

Make sure that you not only review the costs of closing the transaction, but the additional costs outlined in the Clever study above. 

3. Clarify their real motivation behind the help

Before discussing dollar amounts, each family needs to honestly address why the parent or grandparent wants to help and what their expectations are. This is extremely important if the kids encounter a major financial issue after the transaction closes. 

4. Is the child really ready to be a responsible homeowner?  

Just because the parents can help financially doesn’t mean their child is ready to be a homeowner. Key issues to address include:

• Do they have a stable income?
• Do they have a history of regularly paying their bills on time?
• Will they still have six months of payments in reserve when the deal closes? 

5. Have your CPA determine the best mechanism for making the down payment 

Options include an outright gift, a loan, co-signing, co-borrowing or taking an ownership interest, each with different implications for mortgage approval, title, taxes and family relationships.  

6. What impact does the gift have on inheritance and title?

Large gifts have stringent reporting requirements, and co-ownership often creates both title and inheritance complications. Insist that anyone considering helping their kids buy a house consult a CPA and/or estate planning attorney. 

7. Protect everyone’s interest in writing 

If the money is a loan, have your clients document it thoroughly, including whether it is secured by the property, repayment terms, interest rate, plus what happens if there are missed payments, a change in marital status, illness or death.

8. Set clear expectations and boundaries before closing

If parents are contributing to the purchase, do they expect input on the property choice, the offer price, future renovations or whether the child can rent out a room? These questions are far easier to answer before closing. The child also needs to be honest about how much parental involvement they’re willing to tolerate. 

9. Create an exit plan up front 

The family needs to jointly ask a series of “what if” questions and answer them using the worst-case scenario. A major concern is what happens if the parents need the money back to deal with a serious issue in their lives? The time to create an exit plan is before the closing table, not during the crisis.

10. Bring in the right professionals right at the beginning 

At a minimum, families typically need a lender, a real estate attorney, a CPA and an estate-planning attorney. It’s crucial that you are adamant about them addressing these issues before ever showing them a property. It’s always better to surface major issues before the deal closes, rather than cleaning up a mess later.   

Helping a child or grandchild buy a home can be one of the most meaningful financial gifts a family can make. It can also have negative consequences on both the parents and the child’s financial security, major tax complications, title issues impacting inheritance, as well as creating sibling resentment, all because no one voiced their expectations upfront.  

The bottom line is that the Bank of Mom and Dad needs its own underwriting process. Your role as their agent is to ask the hard questions and have them answered long before anyone considers signing on the dotted line.