Parents, Kids, Money, and the Bigger Picture

Sorry for the long message today and I hope you week is going well.
My job as a loan officer is not just to quote rates.
My job is to help people buy homes.
Let me say that clearly, especially for my Realtor partners: I am not here to scare clients away, talk them out of buying, or kill deals.
I am here to help people get in as soon as they are ready, and sometimes even help them get ready faster.
But getting someone into a home is not just about crossing the finish line. It is about helping them make a smart, rational decision and structuring the deal properly.
I believe in "always be closing."
But I also believe that when parents are helping adult children with large amounts of money, everyone needs to stop for a minute and look at the big picture.
Because the goal is not just to close.
The goal is to close correctly. 

I Am in the Advice Business
Every day, I talk to clients about how to buy now, get ready to buy soon, and make better decisions about money, family, credit, taxes, debt, income, and real estate.
Yes, I help people get loans.
But after 35+ years in business, the conversations often go much deeper than the mortgage payment.
We talk about:
Capital gains – Inheritance – Divorce – Marriage – Taxes – Tax deductions – Credit – Credit Repair – Debts – Business income – Self-employment – Construction – Investment properties – Investments – Stocks – 401K’s and IRA’s – Helping adult children – Protecting family money, etc.
And sometimes, the hardest topic of all: knowing the difference between helping and enabling.
These are not always cookie-cutter conversations. And they are definitely not things most people can fully understand from reading something online.
The internet can give people information.
Experience gives people judgment.
That is where I try to bring value.

A Real Conversation That Happens More Than People Think
Yesterday, I had a long conversation with a potential client who wanted to give her daughter and son-in-law $200,000 to help them buy a condo.
The daughter and her husband both make good incomes, but they have no savings, and their credit is “rocky”.
The mom wanted to help. As parents, we understand that. I have been an enabling dad for 29 years, so I get it. It is hard to say no to your kids.
And to be clear, I was not telling her not to help.
I was helping her figure out how to help.
That is a big difference.
She was about to hand over $200,000, and once that money went into a property owned by her daughter and son-in-law, that money could effectively become part of their marital asset picture.
They have no kids. They have only been married a short time.
Nobody wants to think about divorce, separation, financial stress, or family problems when everyone is excited about buying a home.
But when a parent is putting hundreds of thousands of dollars into the deal, someone has to ask the adult questions.
Not to scare anyone.
Not to stop the deal.
But to protect the family and structure the purchase correctly. 

Gift, Loan, or Investment?
We went through several options.
Should she gift the money to the kids?
Should she loan them the money?
Should she buy the property herself as an investment property and rent it to them?
Each option has a very different outcome.
A gift may be simple, but it may also mean giving up control.
A loan may provide more structure, but it must be documented properly.
Buying the property herself may allow her to retain control, receive rental income, benefit from tax advantages, and later transfer or sell the property to the kids when the timing is right.
In this case, she already had the long-term intention of helping the kids end up in the home.
That is great.
But there may be a smarter way to get there.
Maybe she buys it now, rents it to them, lets them prove they can handle the full payment, and later gives, sells, or transfers it when they are truly ready. She may have attached a loan with accruing interest at that time, still protecting her $200K.
That way, she is still helping them get into the property ASAP, but she is not unquestioningly handing over control of $200,000 without thinking through the consequences.
That is the difference between emotional help and strategic help. 

Helping Them Buy Does Not Mean Ignoring the Risk
This is the balance.
I want people to buy.
I want agents to close deals.
I want families to get into homes.
But when parents are involved, especially with large gifts, we have to slow the conversation down just enough to ask the right questions:
Are the kids truly ready for the full payment?
If they have good incomes but no savings, why?
Will this help them become stronger, or will it make them more dependent?
What happens if the marriage does not last?
What happens if one spouse wants out?
What happens if the parent needs the money later?
Should the money be a gift, a loan, or an investment?
Should the parent keep ownership for now and transfer later?
Are there tax consequences?
Are there better ways to structure this?
These questions do not kill deals.
They save deals from future problems.
There is a big difference. 

Good Advice Should Move People Forward
My goal is not to freeze people with fear.
My goal is to move them forward with clarity.
Sometimes that means getting them approved today.
Sometimes that means creating a plan so they can buy in three months, six months, or next year.
Sometimes that means showing parents how to help their kids without risking their own financial future.
Sometimes that means telling the adult children, "You need to prove you can afford the full payment before your parents put this much money on the line."
That may sound tough, but it is actually helpful.
Because buying a home should create stability, not more stress. 

Realtor Partners Should Know This
To my Realtor partners: this is why I want to be involved early.
Not because I want to complicate the deal.
Because I want to help structure it so the deal has a better chance of closing and staying closed.
When clients call me before they make big decisions, we can often find a better path.
We may be able to use a gift properly.
We may be able to document a loan correctly.
We may be able to use a parent as a buyer, co-signer, landlord, or investor.
We may be able to help the kids buy now.
Or we may be able to create a plan that gets them there faster than they thought.
The key is getting advice before the money moves.
Because once the check is written, the options may be limited. 

Always Be Closing - But Close the Right Way
I believe in helping people get into real estate.
I believe in homeownership.
I believe in building wealth through property.
And I believe in helping families help each other.
But I also believe structure matters.
When parents are trying to help adult children, the conversation cannot just be, "How much money can you give them?"
It has to be:
What is the smartest way to help?
How do we protect the parent?
How do we protect the child?
How do we protect the deal?
How do we help them get into the home without creating a future family or financial problem?
That is the real work.
The internet can give people mortgage information.
Experience helps them make better decisions.
After 35+ years in business, I have learned that the best advice is not always the fastest answer.
Sometimes the best advice is:
"Yes, let's help them buy, but let's structure it the right way."
Because I am not here to stop people from buying.
I am here to help them buy smarter. 

Interest Rates
So far this week, two awful days, and two flat days! Need I say more? 

Loan Programs Snapshot

• Government loans (FHA/VA/USDA): in the 5s
• Conventional (≤ $832,750): high 5’s / low 6s
• High-balance: mid 6s
• Jumbo: Low to Mid6s
• Bridge Loans 7.75-7.99

Additional options:

• Bank statement loans (10% down+)
• P&L loans (20% down, no bank statements)
• 0% down options (620+ score)
• DSCR loans (15% down)
• Bridge loans (~7.99%)
• Buydowns (3/2/1, 2/1, 1/0)
• Private Money loans – Hard Money  
• Construction Loans
• 203K loans
• Fix and Flip Loans  

Rates subject to change without notice. 

Condo Update

• Good news: None today
• Bad news: The Madisons / Madisons at Town Center look really bad at this point!  

We love your Non-Warrantable Condo loans!!
Need help checking a condo? Call me, and we can look it up in real time.
Also:
Full California "naughty list" available here:
https://mikemeena.com/non-warrantable-condos/ 

Let's Connect
If you - or your clients, friends, or family - need guidance, I'm here.

📞 661-291-2222 (Direct)

📞 661-714-6258 (Cell)

📞 661-260-2970 ext. 2222 (Office)

📧 Mike@AugustaFinancial.com

Sincerely,