In our culture, owning your home is a sign of financial stability and a great way to build equity. In New York City and in this economy, it is difficult for young adults to save enough money to make a down payment, not to mention having enough liquid assets to be approved by a co-op board.
Many parents, with the means to do so, are gifting their children money for a down payment. I am also seeing adult children who have achieved financial success, purchasing a home for their parents. Are these scenarios permissible in co-ops? Yes, with a few caveats:
1) Not every co-op will approve parents buying for children. It is important to be working with a knowledgeable, experienced and savvy broker who will show you only buildings that will approve you.
2) A notarized letter from the giftor acknowledging that there is no repayment expected must be submitted with the co-op board package. If the “gift” is actually a “loan”, the board will consider it a liability and not an asset.
3) If the apartment is going to be in the child’s name, the child still needs to show income. Some co-ops may request a guarantor or that maintenance payments be held in escrow.
4) Please speak to your agent or broker about your individual situation. They will review your financial situation prior to beginning the search process to determine the best course for you.
For more information on the mortgage approval process of parents buying for children, please read this recent article.