Should I Purchase a Home for My Kid? A Guide to Deciding and Planning for Their Future

Many parents choose to help their child become a homeowner, but it’s important to first consider the financial, legal, and emotional implications.

When your child is ready to take that first step toward independence, it’s only natural to want to help them. For many parents, lending a hand with the purchase of a home is the best way to offer support. After all, if your child is just starting out, they may not be able to afford buying a new home yet given today’s costly and competitive housing market.

Before you step in, though, it’s important to understand the financial, legal, and emotional considerations involved. This guide will walk you through what you need to know to help you make the best decision for your family.

CAN I BUY A HOUSE FOR MY CHILD?

It’s increasingly common for financially secure parents to help their children buy their first homes. Many choose to offer support in various ways—whether it’s gifting cash for the down payment, co-signing a mortgage, or purchasing a property outright and transferring ownership later—to ease the path to homeownership.

There are no hard rules on how you can help. Some parents opt for co-ownership, sharing the property’s equity with their child. Others finance the home themselves, providing a private mortgage with flexible terms. Each method has its pros and cons, and the best approach will depend on your financial situation, your child’s needs, and your long-term goals.

Why modern parents consider buying homes for their children

Many of today’s first-time homebuyers are up against a perfect storm—soaring home prices, steep mortgage rates, and hefty student loans make it tough to get a foothold. Student loan debt adds another layer of difficulty. Even renting isn’t the affordable alternative it once was, with rental costs outpacing wage growth in many areas.

According to Bankrate’s 2024 Housing and Income Study, Americans need a minimum annual income of $110,871 to afford a median-priced home. In Texas, the minimum annual income is $100,629. For context, the median annual salary for those aged 25 to 34 falls below that threshold, making homeownership feel out of reach for many young people. 

Given these circumstances, it’s no surprise that some financially established parents are stepping in to help their children achieve the dream of homeownership. This assistance can give young adults a crucial head start in building equity and financial stability. But while the motivation to help is understandable, there’s more to it than writing a check—considerations like tax implications, estate planning, and family dynamics all come into play.

For parents, the key is to find the right balance between supporting your child and protecting your financial well-being. A well-thought-out approach and honest discussions can help make the decision beneficial for everyone.

Ways parents can help their children buy a home

There are several ways you can help your child achieve homeownership. Whether you’re offering financial support or playing a more active role in the process, it’s important to choose an approach that works for both your family’s needs and your financial situation. Here are some of the most common options:

• Gift a down payment: One of the simplest ways to help is by gifting money for the down payment. This can reduce your child’s loan amount and lower their monthly mortgage payments. Just keep in mind that large gifts may require you to file a gift tax return, depending on the amount.
• Co-sign the mortgage: If your child has a limited credit history or income that doesn’t meet lender requirements, co-signing the mortgage can help them qualify. As a co-signer, you’ll be equally responsible for the loan if they miss payments, so it’s crucial to have a clear agreement in place.
• Finance the purchase yourself: Instead of going through a traditional lender, you can act as your child’s lender by providing a private loan. You’ll need to structure the loan properly, with clear repayment terms. A mortgage servicer can help manage the loan and ensure everything is legally sound.
• Buy the home outright: If your financial situation allows, you can purchase the home in your name and either rent it to your child or gift it to them later. This option gives you full control initially, with the flexibility to transfer ownership when the time is right.
• Co-own the home: Co-ownership allows you to split the costs and equity with your child. When the home is eventually sold, you’ll each receive a share of the proceeds based on your contributions. This can be a good option for parents who want to maintain some financial stake in the property.

PROS AND CONS OF BUYING A HOUSE FOR YOUR CHILD

Buying a home is a significant financial commitment, and when it’s for your child, there are even more factors to consider.

Pros:

• Providing your child with a stable place to live
  Homeownership can offer your child the stability that renting often lacks, allowing them to establish roots and build a sense of community.
• Helping them start saving and building financial security
  If your child no longer has to pay high rent, they can redirect those funds toward savings, investments, or paying off student loans. Over time, this head start can provide a stronger financial foundation, helping them achieve future goals more quickly.
• Acquiring a valuable investment
  Real estate is often a solid long-term investment. The property’s value may appreciate over time, offering both financial security and growth potential.
• Equity building and tax benefits for the mortgage holder
  If you co-own or finance the home, you’ll start building equity with every mortgage payment. As the property’s value increases, so does the equity. Additionally, mortgage holders may benefit from tax deductions on interest payments and property taxes, offering some financial relief.

Cons:

• Potential strain on the family relationship
  Combining family and finances can be tricky. Misunderstandings or disagreements about the home—such as maintenance, payment responsibilities, or future decisions—can create tension. To minimize conflict, make sure you’re setting clear expectations and boundaries from the start.
• Potential impact on your finances and credit score
  Helping your child purchase a home could reduce your liquidity and affect your credit if you co-sign a mortgage or take on additional debt.
• Liability when co-signing a mortgage
  Co-signing might help your child qualify for a loan, but it also makes you equally responsible for the debt. If your child falls behind on payments, the lender will hold you accountable.
• Gift tax ramifications
  Large financial gifts—such as a down payment or the outright purchase of a home—may be subject to federal gift tax regulations. If the gift exceeds the annual exclusion limit, you may need to
  file a gift tax return and possibly pay taxes on the amount. You’ll want to consult with a tax professional to avoid any surprises.

IN-STATE TUITION BENEFITS

If your family lives outside Texas and your child is attending Texas A&M or another public university in the state, purchasing a home for them can provide substantial financial benefits—particularly in tuition savings.

Many public universities like Texas A&M offer significant tuition discounts for in-state residents. Buying a home in Texas where your child can set up residency is a strategic step toward qualifying for those lower rates.

Generally, out-of-state students pay considerably higher tuition—often two to three times the in-state rate. However, if a parent or the student relocates to Texas and establishes residency, the student may be eligible for the in-state tuition rate.

For example, according to U.S. News, Texas A&M’s annual tuition rates are:

• In-state: $12,413
• Out-of-state: $40,307

Based on this, in-state tuition rates can save you around $27,894 annually or over $111,000 for a four-year period. 

To qualify for in-state tuition, the student must first establish domicile in Texas, and one way to do this is to own and occupy real property in the state. The student must live in the home for at least 12 consecutive months to establish residency, another crucial requirement for in-state tuition eligibility. If the student enrolls at the university for another three years after the 12-month period, your savings can be as much as $83,682 given the figures above.

UNDERSTANDING MARKET CONDITIONS AND TIMING

While you can’t perfectly predict the market, understanding basic trends can help you make smarter decisions.

Market conditions vary dramatically by location. While national headlines might trumpet a “buyer’s market” or “seller’s market,” what matters most is what’s happening in your target neighborhood. Pay attention to local factors like job growth, new construction, and population trends—these often impact home values more than national patterns.

Here’s what to watch for when deciding if it’s a good time to buy:

• Housing inventory. More homes for sale typically means better prices and less competition. When inventory is low, expect bidding wars and higher prices. Your real estate agent can tell you if current local inventory levels favor buyers or sellers.
• Interest rates. Even small rate changes significantly impact monthly payments. For example, a 1% rate increase on a $400,000 mortgage could add hundreds to your monthly payment. If rates are high when you’re ready to buy, consider starting with a smaller home or planning to refinance later.
• Neighborhood trajectory. Look for signs of an improving area: new businesses opening, home renovations happening, and good school ratings. These factors tend to drive property values up over time, regardless of market cycles.

Remember that while timing matters, finding a home that meets your child’s needs and fits your budget is more important than waiting for perfect market conditions. A property in a solid location with strong fundamentals can be a good investment even if you don’t buy at the absolute bottom of the market.

TITLE CONSIDERATIONS

How you structure the property’s title has significant legal and financial implications. This decision affects ownership rights, inheritance, and what happens if one owner passes away, so it’s important to understand your options, which are:

• Title in parent’s name only
• Title in child’s name only
• Shared title between parent and child

If you’re helping with the mortgage, the decision might be made for you—many lenders require all parties responsible for the loan payments to be on the title. Beyond this basic choice, shared ownership can be structured in two main ways: joint tenancy and tenancy in common.

For joint tenancy, the following defining elements apply:

• Property interests must be identical among all title holders, meaning no owner can claim a larger share than others
• Each co-owner has full access and use of the entire property.
• If one owner passes away, their share automatically transfers to the remaining owners, avoiding probate.
• Co-owners cannot leave their share to heirs in a will, as survivorship rights take precedence.

This straightforward arrangement is often ideal for parents who want to ensure their child automatically inherits their share of the property. However, joint tenancy also grants immediate ownership rights to the child, meaning they must consent to any future sale or refinance. Additionally, the property could be impacted by the child’s financial or legal issues (e.g., debt, lawsuits, or divorce). For more control while still avoiding probate, some families opt for alternatives like a revocable living trust or a transfer on death (TOD) deed.

Tenancy in common offers more flexibility but less automatic protection. Key characteristics include:

• Owners can hold unequal shares of the property
• Each owner can freely sell or transfer their share
• No automatic right of survivorship—an owner’s share passes to their chosen heirs according to their will or trust
• Requires proper estate planning to ensure smooth transfer of ownership

This option might be preferable if you want to maintain control over who inherits your share or if you’re investing unequal amounts in the property. The right title arrangement depends on your long-term goals, estate planning needs, and relationship dynamics. You may want to consult with a real estate attorney to understand which option best suits your situation.

Tax considerations

In addition to title considerations, understanding the tax consequences of helping your child buy a home is crucial for proper financial planning. In making your decisions, it’s best to have the guidance of a CPA or tax advisor.

While we at Bock Realty are not CPAs or attorneys and cannot provide that kind of advice, we can connect you with highly trusted professionals who can help you in navigating these legal and financial intricacies. 

SECURE YOUR CHILD’S FUTURE WITH SMART REAL ESTATE DECISIONS

Helping your child buy a home is a big step—one that requires careful planning and expert guidance. Whether you’re considering gifting a down payment, co-signing a mortgage, or purchasing an investment property for your child, having the right strategy in place can make all the difference.

Bock Realty Group is here to provide tailored real estate solutions that align with your financial goals and your child’s future. With deep market knowledge and a commitment to your best interests, we’ll help you navigate this important decision with confidence.

Let’s explore your options together. Contact us today at 979.325.2134 or send us a message to get started.