Helping Your Child Buy a Home: Gifts, Loans, and Other Considerations

by Jason Burke

With home prices and borrowing costs making it harder for some first-time buyers to get started, financial help from parents can make a real difference. Some parents give money toward a down payment, while others lend funds, co-sign a mortgage, or help purchase the property outright.

Each approach comes with different financial and legal implications. Before money changes hands, it's worth having a clear conversation about what everyone expects.

Gift, Loan, or Shared Ownership?

The first step is deciding what kind of help you're offering.

A gift is often the simplest option. Parents contribute money toward the down payment or closing costs without expecting repayment or an ownership interest in the home.

A family loan allows parents to help while expecting the money to be repaid. If you choose this route, put the terms in writing, including the repayment schedule and interest rate. The arrangement may also affect the buyer's mortgage approval, so the lender needs to know about it upfront.

Co-signing or shared ownership can provide additional support, but these options carry more risk. A co-signer may be responsible for the mortgage debt without having ownership rights. If parents are added to the deed, the family needs to understand how ownership, future sales, and other major decisions will be handled.

What Richmond-Area Homebuyers Should Know

If you're helping a child purchase a home in Virginia, there are a few practical considerations to address early.

Talk to the mortgage lender first. Gift funds generally require documentation, including a gift letter confirming that repayment isn't expected. Lenders may also require documentation showing where the funds came from and how they were transferred. Requirements vary by loan program, so check with the lender before moving money. For conventional mortgage guidance, see Fannie Mae's requirements for personal gifts.
Understand the tax implications. For 2026, the federal annual gift-tax exclusion is $19,000 per recipient, per donor. In other words, each parent may generally give up to that amount to a child during the year without the gift counting toward the donor's lifetime gift and estate tax exemption. Gifts above the annual exclusion may require a federal gift-tax return, but that doesn't automatically mean tax is owed. For details, visit the IRS guidance on gift taxes or consult a tax professional.
Get legal advice if ownership or repayment is involved. Virginia law allows property to be held under different forms of joint ownership, and the wording on the deed can affect what happens when an owner dies. Simply adding a parent’s name to a deed does not automatically mean the surviving owner will inherit the other person’s share. If parents intend to lend money formally or retain an ownership interest, a Virginia attorney can help structure the arrangement. See Section 55.1-135 of the Code of Virginia for details.
Think about the rest of the family. If you have other children, consider whether this assistance is a one-time gift, an advance on an inheritance, or something you intend to make available to each child. There isn't one right answer, but clear expectations can help prevent future misunderstandings.
Don't forget your own financial future. Helping your child buy a home can be rewarding, but make sure the contribution doesn't put your own retirement plans, emergency savings, or future financial needs at risk. You may want to help, but you also need to be comfortable with what you're giving up.

The Bottom Line

Financial help from family can open the door to homeownership, but the best arrangement is one that everyone understands before the process begins. Decide whether the money is a gift, a loan, or part of a shared ownership arrangement. Then involve the lender early and consult the appropriate legal or tax professional when needed.

If you're helping a family member buy a home in the Richmond area and have questions about the homebuying process, I'm happy to help you understand the real estate side of the transaction and connect you with the right professionals.

This article is for general educational purposes only and is not legal, tax, or mortgage advice. Rules and requirements can vary based on individual circumstances and loan programs. Consult qualified professionals for advice specific to your situation.

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