Get Creative with Down Payment

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If you are a first-time home buyer who lacks the upfront money for a down payment, you might want to enter into one of many types of co-ownership arrangements.

For example, an equity-sharing arrangement enables parents or another party to contribute all or part of the down payment for the intended occupants; these investors are listed on the title and are paid rent for their ownership stake, which can be put toward such expenses as insurance, maintenance, and property taxes that can be deducted from their income taxes.

A co-occupier arrangement, meanwhile, means two parties pay an equal portion of the down payment and homeownership costs; both reside in the home and share any profits at the time of resale, although they risk being held liable for the entire mortgage if one leaves and refuses to pay.

First-time buyers can receive downpayment gifts from parents, but parents must pay gift taxes if they contribute more than $12,000 in a single year. Experts discourage parents from obtaining personal loans to help out, as these do not permit tax deductions and could make the borrower appear as a greater risk in the eyes of the lender.

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The Moxley Team   | July 12, 2007

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