Helping Children Become First-Time Long Island NY Homebuyers

Young, first-time Long Island NY homebuyers are becoming an increasingly rare site these days in the housing market.

According to the Census Bureau, the homeownership rate for the 35-and-under crowd fell to a 22-year low in the second quarter. This has some parents wondering whether they can, or should, help their kids buy a home.

Should You Help Children Become First-Time Long Island NY Homebuyers?

Many first-time Long Island NY homebuyers are getting help from their parents

Parents have helped their children for decades with down payments and even loans. But recent economic and mortgage-market realities have made the question more acute. Whether you should step in is a question only parents can answer. Here are some considerations if you do decide to help.

Down Payment Assistance:

There are potential tax implications to consider. Individuals can currently make tax-free gifts of up to $14,000 per recipient. That means Mom and Dad could give as much as $56,000 to their child and a spouse before hitting the IRS's annual cap on tax-free giving. Make sure your child is married to qualify for that limit. Live in boyfriends/girlfriends don't qualify.

Anything above those limits requires reporting to the IRS. But you can certainly give more. The good news is you won't have to pay taxes until you bust through the lifetime gift exclusion, which now sits at $5.34 million, well above most people's worry limit.

Lenders will have specific guidelines for how to document and source gift funds. They'll also want to see in writing that this is a "no strings attached" donation, and not a loan to be repaid.

Depending on the type of loan and gift amount, children may need to contribute some of their own money to the cause to become first-time Long Island NY homebuyers.

Co-Signing:

Parents can also co-sign on a mortgage with their child, although we don't recommend it. Some loan types, like VA home loans, have occupancy restrictions, but there are plenty of options for co-borrowers who don't actually plan to live in the property full time.

Helping with a down payment is one thing. Co-signing on a loan exposes parents to significantly more risk when it comes to their credit and financial profile. A child who misses a mortgage payment or winds up in default could wreck their parents' credit for years.

No one expects to lose a job, get divorced or face some medical crisis. Anything that affects your child's ability to make good on their obligation means the full responsibility falls to you. That may or may not be financially feasible for some parents.

Parents as the Lender:

Parents with the liquidity for an all-cash purchase can opt to draw up their own mortgage and repayment plan, likely with the help of an attorney and a financial planner.

There are federal guidelines regarding interest rates on loans like this, which is all the more reason to consult financial and legal experts. This kind of arrangement can generate interest income for parents, while getting kids into a loan with a lower rate than they'll ever find on the market. It could be the only way for the children to become first-time Long Island NY homebuyers.

The Simplest Approach:

Although not necessarily feasible, paying all-cash is certainly the simplest way to go. No credit review, no checking where the down payment came from. All cash sales accounted for almost a third of all home purchases in June.

No matter which route you take, if helping your children become first-time Long Island NY homebuyers, we strongly recommend you seek legal counsel and advice when structuring any agreements.

Check out some of our other articles on becoming first-time Long Island NY homebuyers by clicking the Long Island NY Home Buying Tips link to your right under our Long Island NY Real Estate Categories.

Reasons for Buying a Long Island NY Home Now

Reasons buying a Long Island NY home now is a smart move
Thinking of buying a Long Island NY home? You may be better making the decision sooner rather than later!

If you qualify for a mortgage and choose not to buy now, you will be kicking yourself a year from now.

Thanks to very low inventory, Long Island NY home prices are projected to increase by 6.3 percent through April 2015, according to a recent study by Corelogic, a leading global property information, analytics, and data-enabled services provider.

Just how much could that increase cost you? More than you might think. On a $300,000 house today, the same house will cost you $318,000 a year from now.

4 Reasons Why Buying a Long Island NY Home Now is a Smart Move

#1 – Buying a Long Island NY home will only become more expensive because of low inventory and rising demand. With a shortage of housing and rental units available, Long Island NY housing prices and rents have increased, leading to affordability issues. The good news is that this supply and demand issue will solve itself once more housing units are built to accommodate the population growth and young families looking at buying a Long Island NY home. The bad news is that it could take a while, and prices will climb until then. So now might be a good time to buy, before prices peak.

#2 – Buying a Long Island NY home will certainly cost more, even if prices don't increase, because of the Fed planning to taper off bond-buying in October. The Fed is now buying $25 billion per month, down from $85 billion at the peak. The end of the program, which was aimed to keep interest rates low, is expected to result in higher interest rates, and any increase in interest rates could create even less favorable conditions for buyers.

Rising rates can have just as big an impact on affordability as does rising prices due to low housing inventory. When mortgage rates increase, borrowers experience greater difficulty qualifying when they are wanting to buy.

While you've already missed the bottom of the market with home prices, interest rates are still very low. Don't risk rates going up, which can ultimately cost you big on your home's price tag.

#3 – Buying a Long Island NY home will continue to become less affordable due to the current economy's flat wages. If home prices continue to increase, housing could in theory become less affordable if your take-home pay doesn't keep up with its growth. Can you afford to wait?

#4 – Buying a Long Island NY home now rather than later will have you beating others to the punch who procrastinate and wait til later to buy. The pent-up demand of younger professionals, who moved back in with their parents during the recession, is about to explode. And as these young people move out and form new households of their own, they will drive up housing demand.

While the competition helps the overall home values in the area, it also inflates prices to the point where buying Long Island NY homes is no longer affordable for a large percentage of potential home buyers. It's only expected to get worse as more and more young professionals feel ready to buy, so it's a smart move to buy now and avoid the potential price gouging altogether.

Stay abreast of all the news that affects buying a Long Island NY home right here at our website. More articles can be found in the Long Island NY Real Estate section, or the Long Island NY Real Estate News section, both to your right under Long Island NY Real Estate Categories.

Why Young Long Island NY Homebuyers Are Holding Back

The younger generation of potential Long Island NY homebuyers are finding barriers to homeownership almost overwhelming. The lack of affordable homes, student debt, and unemployment, are keeping many of these young would-be-buyers either renting, or living with parents.

This inability for young Long Island NY homebuyers to get started as homeowners is taking some of the punch out of the housing recovery. Although "millennials," or 20- to 34-year-olds, are starting to find jobs and move out on their own, most are becoming renters, not buyers. Many are starting families, which adds expenses to the monthly budget that can't be allotted to a mortgage payment.

Many potential Long Island NY homebuyers are faced with student debt and starting families that hold them back from homebuying
We're at a point now where young people are starting to move out of their parents' homes. But that's only just begun over the past year or so. When young people start moving out of their parents' homes, most will opt to rent first before they buy. The key thing about young adults is there still are a lot of barriers to homeownership.

It's not just the limited inventory on the lower end, it's saving for the down payment to qualify for the mortgage in the first place. It takes years of work to save enough for a down payment and qualify for a mortgage. And for young people who are just getting jobs now, they'll be renting for awhile before they will even qualify to buy.

Student Debt Preventing Most Young Adults From Becoming Long Island NY Homebuyers

Student loan debt makes it harder to save for a down payment. What you might have been saving is instead going to pay back those student loans.

The new Qualified Mortgage rules take into account all of your debt (affecting) your ability to repay a loan. Student loan debt is yet another barrier to home ownership for young adults wanting to become Long Island NY homebuyers.

The good news for the Long Island NY housing market is that price gains are slowing down somewhat. In addition, the share of home foreclosures has gone way down as foreclosed homes have gone through the entire process and been sold off.

Potential Long Island NY homebuyers still trying to decide if it's cheaper to buy than rent need to analyze their future situation carefully.

If you plan to stay put for seven years, itemize (your deductions) in the 25 percent (tax) bracket and get a mortgage of 4.5 percent, it's about 15 to 25 percent cheaper to buy than to rent in Long Island NY . If you're not itemizing and you only stay put for five years, buying is more expensive than renting in most cases.

So your personal circumstances matter. How long you stay put. Whether you're itemizing. And also what mortgage you can get.

Check out some of our other articles and tips for Long Island NY homebuyers by clicking the Long Island NY Home Buying Tips link to your right under our Long Island NY Real Estate Categories.

Renting or Buying a Long Island NY Home: Take Your Time

Trying to decide between renting or buying a Long Island NY home used to be a no-brainer before the recession. Most advisors would say, buy a home as soon as you can because it was the route to financial independence, forget renting because it was a waste of money.

Today, many people who would have once jumped at the chance of buying a Long Island NY home are thinking a little more about it and weighing their options.

Attitudes about homeownership have shifted, according to "How Housing Matters: The Housing Crisis Continues to Loom Large in the Experiences and Attitudes of the American Public," by the MacArthur Foundation.

When asked, compared with 20 or 30 years ago, how likely it is for families today to build equity and wealth through homeownership, two-thirds of respondents to a poll accompanying the report said it is less likely than in the past. And that sentiment was pretty consistent along all income and age groups.

Renting versus buying a Long Island NY home is a tougher decision today than 20 or 30 years ago.

Buying a Long Island NY Home Tempting

Now that things are improving in the Long Island NY housing market, people may be tempted to rush into homeownership because they want to take advantage of lower home prices. Or they are afraid of missing out on still fairly low interest rates for home mortgages.

The big decision point is, if the time isn't right and your numbers don't work, keep renting and keep saving.

Some people in the MacArthur poll deciding to buy instead of continuing to rent had to get a second job, stopped saving for retirement or racked up credit card debt trying to cover their housing expenses.

The study revealed that families are spending 40 to 50 percent or more of their net monthly income on housing. If you are spending more than 30 to 36 percent on housing, you're probably headed for trouble. It's why most lenders use that magic 36 percent figure to qualify you for a mortgage. If you're spending more than that, they fear you may be in over your head, and the last thing they want is for you to default on your loan.

Obviously we are a huge advocate of homeownership. However, when it comes to something as important and expensive as a home, you should take it slow. Take as much time as you need to become comfortable with the decision of buying a Long Island NY home. And when the time is right, we'll help you find the home of your dreams.

Call us or fill out our brief inquiry form at this site and we'll help you decide between renting or buying a Long Island NY home and which is right for you.

Buying a Long Island NY House – What Stays, What Goes

When buying a Long Island NY house, there is sometimes confusion as to what stays, and what goes. Most listing agreements will spell out things like appliances not built in, such as refrigerators, washers and dryers, and the like.

When buying a Long Island NY house, what stays and what goes is sometimes a complicated questionIn layman's terms, a fixture is something that initially was not attached to real property, such as an air-conditioning window unit or a wet bar that was installed in a house after it was built.

Still, legal issues arise. Sellers move out and take their belongings, including those they attached to the property, and the homebuyer discovers after settlement that the seller removed them.

If it is a fixture, it stays with the property.

Is There Any Clear-Cut Definition of a Fixture When Buying a Long Island NY House?

A Nebraska court case once ruled "fixtures are in the twilight zone between things real and things personal."

Obviously, the answer isn't so clear-cut. Courts have issued conflicting opinions.

Thus, we get litigation from time to time when someone is buying a Long Island NY home and believes the seller may have taken something with them that should have stayed with the property.

According to a 1982 Washington, D.C., Court of Appeals case, "in this jurisdiction, when determining whether an article is a fixture, the court may consider three factors: (1)actual annexation, according to the nature and use of the article; (2)its adaptation to the use for which it was annexed; and (3) the intention that it should be a permanent accession to the realty."

Well that makes it about as clear as mud.

There is a lesson to be learned: Put everything in writing. If you are buying a Long Island NY house and there is an item that you want to remain there, spell this out specifically in the sales contract. For example: "the wall racks installed in the garage shall convey."

Alternatively, if you are a seller, and there are items that you want to remove, make that clear in the sales contract: "The wall racks installed in the garage DO NOT convey."

Talk with your real estate agent and attorney to make sure you fully understand local laws and rules on fixtures when buying a Long Island NY house. In the final analysis, a written document is the best protection.

For more tips on buying a Long Island NY house, check out our other articles by clicking on the Long Island NY Home Buying Tips link to your right under Long Island NY Real Estate Categories.