The greatest gift you can give your children: a signature.

Why you should co-sign the mortgage on your child’s first home. 

How this simple act is the greatest gift you can give your children.

Buying a first home is a significant milestone in a young adult’s life but in today’s housing market, it can be a daunting challenge. High property prices, rising interest rates, and strict lending criteria make it difficult for many young people to take that first step onto the property ladder. Thankfully, there’s something you can do to help.

As a parent, helping your child purchase their first home can be one of the most meaningful investments you make in their future. This month, Everest experts will help you explore the key reasons why you should consider co-signing – and walk you through the most common myths about the process.

Let’s dive into the specifics with the help of our featured Everest expert: Linda Friedman.

Financial security starts with a strong foundation. 

Real estate has historically been one of the most reliable long-term investments. By helping your child purchase a home, you’re giving them a valuable asset that can appreciate over time. Unlike renting, where monthly payments go towards someone else’s mortgage, homeownership allows your child to build equity. This equity can serve as a financial cushion, providing them with options in the future, such as taking out a home equity loan for major expenses or selling the property for a profit.

“Helping first-time home buyers get into the home of their dreams is the most satisfying part of my work,” says Linda. “With the right mortgage company at your side, you can help your kids save money on housing – and harvest equity for years to come. Once parents know that, the decision is simple.”

The money your kids can save starts with their change of venue. In many markets, the cost of renting can be as high as – or even higher than – mortgage payments. By helping your child buy a home, you’re enabling them to avoid the ‘rent trap’, where they’re spending large sums of money without gaining any long-term benefit. Instead, they will be investing in their own future.

“I’ve never had any parent regret doing this for their kids,” Linda explains. “It puts them at a huge advantage over other young adults their age – while the non-occupying co-signer takes on minimal risk.”

According to Linda, the main risk of loss to the parent or grandparent signing off on the loan is a potential hit to their credit if the buyer defaults on their loan. In perspective, that risk is far outweighed by the benefit of co-signing.

Help your kids navigate the housing market.

One of the biggest barriers to homeownership for young adults is the upfront cost. Between down payments, closing fees, and the various fees associated with buying a home, the initial financial outlay can be overwhelming. By contributing to these costs, you can significantly ease the financial burden on your child, making it possible for them to enter the housing market earlier than they might be able to on their own.

“Buying a house can be stressful for anyone,” Linda says. “I have had people come to me that were turned down for their loan a week before they were supposed to close on their house. The market is competitive, and if you’re a new buyer with less robust credit history and fewer assets, the experience can be even worse.”

In addition, even if they are able to secure a loan, young adults tend to be subject to less favorable terms than their more experienced counterparts. Your assistance as a parent or guardian can help your child secure better terms. For example, a larger down payment often results in lower interest rates and more favorable loan conditions, reducing the overall cost of the mortgage. In some cases, your involvement may help them qualify for a mortgage they otherwise wouldn’t have been able to secure due to insufficient income or credit history.

“The mortgage process is longer and more complicated without the right help.” Linda elaborates. “I’ve had people come to me beyond frustrated – feeling like they were never going to get their house. I’ve helped people like that close in less than a month.”

And we get it: many people who come to Everest have already been burned by another facilitator. They’re overwhelmed, they’re tired, and they’ve been fed a few too many myths about the co-signing process.

Let’s delve into those now, shall we?

6 Myths About Co-Signing a Loan for Your Kids

#1: My Kids Won’t Learn Financial Responsibility

It’s easy to think that helping your child make a big purchase will harm them in the long run. But, in this case, it’s just not true.

“When someone co-signs,” explains Linda, “they’re standing as a support system for the other person. It’s still going to be your child’s responsibility to pay on the loan and keep detailed records of their payments – keeping proof of each payment for the duration of the loan.” 

Helping your child buy a home is an opportunity to teach them about financial responsibility. The process of purchasing and maintaining a home involves budgeting, saving, and managing debt – skills that are crucial for financial independence. By guiding them through the process, you can help them develop good financial habits that will benefit them throughout their lives.

#2: Co-Signing for My Child Will Throw Them In the FInancial Deep End

We get it: you don’t want to push your child into a situation that they are not ready for. However, you might be surprised to know that the rental market can be even more unpredictable than permanent housing. Pricing on rental units can be extremely volatile, with rates subject to fluctuations based on demand, inflation, and local economic conditions.

According to Linda, the right mortgage partner will help you take this and other factors into account to figure out if co-signing is the right option:

“A lot of people have heard the rule that you shouldn’t spend more than 50% of your income on your mortgage. So, they’ll look at their or their child’s finances and say ‘we can’t possibly do this’. But there are other factors at play here. I always sit down with clients and have a frank conversation. Mainly, what I want to find out are the answers to two questions: (1) how can I help you qualify for a mortgage? and (2) how can you prove to me that you can afford to make the payments – even with rising interest rates? The 50% rule is helpful, but it’s too cut-and-dry for real life. So, we talk about it. If the numbers add up, I get to work. If they don’t, I’m not afraid to tell them ‘no’.”

#3: Co-Signing Could Negatively Affect My Relationship With My Child

Helping your child buy a home is not just a financial investment; it’s an investment in your family’s future. It’s an opportunity to work together towards a common goal, fostering a sense of partnership and mutual support. This shared experience can strengthen your relationship and create a deeper bond between you and your child.

“The entire process definitely strengthens family bonds,” Linda says. “They’re working together toward a common goal, but the roles of parent and child are still clearly established. It’s a structured interaction that can give the child a sense of security and support.” 

For many parents, helping their child buy a home is part of a broader strategy to leave a lasting legacy. Whether it’s passing down wealth, values, or a sense of responsibility, contributing to your child’s homeownership is a way to make a positive impact on their life that will last long after you’re gone.

#4: If My Kids Default on their Loan, It Could Affect My Finances

As Linda mentioned earlier in our interview, the main risk that co-signers take on is to their credit score. Otherwise, there may actually be advantages to the process. For example, you may be able to gift money towards the down payment without incurring gift taxes, depending on current tax laws and limits. It’s important to consult with a tax advisor to understand the potential tax implications and benefits of your contribution.

“Careful planning and open communication with your child are essential to this process,” Linda says. “However, it’s important to remember that your financial business won’t be all out in the open either. A good loan officer will have private conversations with both you and your child to ensure that you can maintain your privacy whenever possible – and keep your finances as secure as possible.”

#5: I Won’t Be Able to Cosign for All of My Children

We are glad to say that this is absolutely not true. Most loan providers just have a restriction on how often you can co-sign – but no limits on how many you have simultaneously.

“In general, parents can sign for a different child every 12 months,” Linda explains. “Plus, as long as their kids are keeping track of their payments, their ability to co-sign won’t be affected by any refinances the kids take on. They just need to provide proof that they’ve been making their payments for at least 12 months, which omits your liability and allows you to co-sign again.”

This means that parents don’t have to worry about being limited to cosigning for one child and not the others. So long as the family is keeping appropriate records, they can do it again and again.

#6: I Have to Be Rich to Cosign

We can see where people can get this idea. While parents are welcome to help their children come up with their down payment, they are not obligated to pay anything. The only thing they’re taking on as cosigners is liability.

Linda says: “Many parents feel like they can’t afford to help their children, but co-signing can help with minimal risk. I’ve helped grandparents living on social security co-sign for their grandchildren. Basically, we just need to come up with as many financial assets as possible – such as from retirement income – and use them to secure the loan with better terms.”

A stepping stone to their financial future.

Homeownership encourages long-term thinking and planning. Unlike renting, which often involves short-term leases and the possibility of frequent moves, owning a home requires a commitment to staying in one place for an extended period. This stability can help your child focus on other long-term goals, such as career advancement, further education, or starting a family. It can also give them a greater sense of emotional and psychological stability, which can have positive effects on their overall well-being and mental health.

“Owning a home can be a stepping stone to other great opportunities,” says Linda. “Things like opening a local business, exploring networking events in your area, or even buying your own real estate investment properties. It all starts here: with your child’s first lesson in financial responsibility.”

Everest says: help your child 

close with confidence.

Everest Equity

Licensed for 

Residential Mortgage Origination in

NY, NJ, CT, PA, NC, FL, and TX

No matter where you co-sign, you can trust our diverse team of mortgage professionals to procure optimal terms – with superior guidance for you and your family.