Guiding the Journey: A Parent’s Role in a First Home Purchase
Leslie Sherman and her husband Conrad Useldinger never imagined they would own a home. The couple live in San Jose, CA, one of the fastest-moving and most expensive housing markets in the country, and they had accepted they would be renters for life. That is, until Leslie’s parents made an offer: let's buy a home together.
Across the country, families like the Shermans are forging new paths to homeownership—ones that blend financial support with co-ownership, legal contracts, and sometimes, family negotiations that rival real estate closings in complexity. The reasons are clear: high home prices, stubborn interest rates, and generational wealth disparities have made it nearly impossible for many first-time buyers to get in the game without help.
But stepping in as a parent isn’t as simple as writing a check. Today’s family-financed home purchases come with financial, legal, and emotional considerations that can affect everyone involved.
Why More Parents Are Getting Involved
The numbers tell a clear story. In 2024, just 24% of homebuyers were purchasing their first home, the lowest share on record since 1981, according to the National Association of Realtors.
That’s not for lack of interest. It’s a direct result of affordability barriers that even two full-time incomes can’t always overcome. Rising mortgage rates, persistent student debt, and home prices that haven’t meaningfully dropped are making it nearly impossible for younger generations to buy without a financial boost.
That’s why parents are increasingly stepping in as co-investors, co-signers, and co-owners. From 1994 to 2022, the proportion of young homebuyers relying on a co-signer from an older generation more than doubled, rising from 1.6% to 3.7%, according to Freddie Mac. The trend is even more pronounced among Gen Z buyers—up to 38% received help from their parents to make their first home purchase, according to a study by Credit Karma and Intuit.
Even in more affordable markets, parental support is often the hidden engine behind many first-time purchases. While some areas boast relatively low median listing prices—like Rochester, NY at $129,900 or Harrisburg, PA at $140,000—those numbers can still be daunting for buyers in their 20s and 30s.
In these cases, the help might not be as dramatic as an $850,000 condo split four ways, as in the case of the Shermans, but a smaller gift, a co-signed loan, or even a symbolic show of financial backing can be the difference between a winning offer and another year of renting.
The Many Forms of Support—and What Each One Means
There’s no one-size-fits-all way for parents to help their kids buy a home. From behind-the-scenes financial boosts to full-blown co-ownership, today’s family-backed purchases take many forms, each with its own legal, financial, and emotional implications.
Gifting a Down Payment
The most common way parents help is by contributing to the down payment, often as a gift. In 2025, individuals can gift up to $19,000 per recipient without triggering the gift tax. If the gift exceeds that amount, it must be reported to the IRS, though most won’t owe taxes unless they’ve used up their lifetime exclusion of $13.99 million.
To satisfy mortgage lenders, the gift can’t be informal. A signed gift letter is usually required, stating that the money is a gift and doesn’t need to be repaid. Lenders may also request bank statements and records verifying the source and transfer of funds. Missing or unclear documentation can delay or even jeopardize loan approval.
Co-signing a Mortgage
Parents can also help by co-signing the mortgage, especially when their children face challenges qualifying due to limited credit history or high debt-to-income ratios. Co-signing doesn’t involve an upfront cash contribution, but it carries significant financial risk.
Co-signers are legally responsible for the loan. If payments are missed or the borrower defaults, the co-signer’s credit is affected, and they may be pursued for repayment. It can also cause emotional tension, especially if roles aren’t clearly defined. Who makes decisions? Who takes responsibility? Boundaries and expectations should be clarified from the outset to avoid misunderstandings.
Co-ownership or Buying Outright
Some families opt to buy the home together, with all parties listed on the deed. Ownership may be structured as Joint Tenancy With Right of Survivorship (JTWROS), where ownership is equal and passes automatically upon death, or as Tenants in Common (TIC), which allows unequal shares and separate inheritance rights.
A growing number of families are also using shared equity agreements. These arrangements spell out who owns what and how future gains or losses are divided. They are especially helpful when a parent’s contribution is substantial but not purely a gift.
In the Sherman family’s case, the parents paid for 75% of the home and retain 75% ownership. When the home is sold, the proceeds will be split according to that same ratio.
From Support to Strings: Setting Boundaries and Expectations
Helping a child buy their first home can be a beautiful expression of love. But when money changes hands without clear agreements, even the closest families can encounter conflict.
Tension may not stem from major disagreements. It can grow from smaller decisions: a parent expecting input on renovations, or a child feeling tied to a city because of the support they received. Without clarity, these situations can turn complicated quickly.
That’s why it's critical to document expectations before closing. A co-ownership agreement can address key questions such as:
How mortgage payments, taxes, and maintenance costs will be split
What happens if one party wants to sell or exit
Whether remaining parties have the first right to buy out a departing share
Involving a neutral third party like a financial planner or estate attorney can help ensure that the agreement is fair and thorough. While it might not feel sentimental in the moment, writing things down is often the most loving and responsible step a family can take.
By: Allaire ConteI Realtor.com I July 21, 2025
Photo: PixelsEffect/Getty Images