Before helping an adult child buy a home, ask these questions

A down-payment gift can get an adult child into a home and still leave them short every month on the mortgage, taxes, and insurance.

Before transferring money or signing a loan, answer two questions separately: can you provide the help safely, and can the child carry the home after the help ends?

Is it a gift, a loan, or shared borrowing?

A gift does not have to be repaid, and a family loan does. Co-signing goes further: the CFPB’s mortgage definitions describe a co-signer or co-borrower as agreeing to take full responsibility for repayment with the borrower. If the child misses payments, your credit record and finances are on the line.

Some loan programs define a co-signer as someone who is not on the title and has no ownership interest in the home. In that arrangement, you could owe the whole loan on a house you do not own.

If you expect the money back, tell the lender it is a loan.

Will the money qualify for the intended loan?

Gift-fund rules and documentation differ by financing option, and some loans do not allow gift funds for the down payment at all. The CFPB advises asking the loan officer whether gifts are allowed and what proof is needed, and the time to ask is before any money moves.

Where gifts are allowed, the CFPB says your child may need to prove where the money came from and submit a signed statement that it is a gift and not a loan from a third party. A large deposit that shows up in the child’s account without a paper trail can hold up the application, so send the money in a way both of you can document.

Also confirm how the money affects cash to close. A gift toward the purchase is not automatically a reserve available after closing.

Who handles the gift tax?

Under the IRS gift-tax FAQ, the donor is generally responsible for paying gift tax, so any tax question lands on you. Gifts up to the annual exclusion for the calendar year are not taxable gifts, and the exclusion applies per recipient.

If you are married, each spouse gets the annual exclusion on the gift, so two parents can give twice the single amount. The IRS adjusts the exclusion over time, so look up the figure for the year you make the transfer instead of relying on an old limit. A gift above the exclusion can require filing a gift tax return even when no tax is owed.

What would remain in your own accounts?

Suppose you have $60,000 in accessible savings and are considering a $25,000 gift, which would leave $35,000.

If $12,000 is already allocated to a repair and another $6,000 to known bills, only $17,000 remains unassigned. With essential expenses of $4,000 a month, that is about 4.25 months of coverage.

Also review retirement income, other debts, health needs, and whether you might need the money soon. Withdrawing retirement assets or borrowing against your home to fund the help can add taxes, lost growth, or a new payment.

Does the child’s ongoing budget work?

Ask for a complete ownership budget: principal, interest, taxes, insurance, mortgage insurance if applicable, association dues, utilities, maintenance, and transportation.

If the budget is short by $300 every month, a one-time gift does not remove that recurring gap unless it changes financing enough to make the whole plan work.

Check whether the child expects future help with repairs or payments. You may be agreeing to more than the down payment if those expectations remain unstated.

What should the written agreement cover?

The CFPB’s guide to family lending suggests writing down what everyone agreed to and giving each person a copy. For a family loan, the agreement should say how much, how and when you will be repaid, when the arrangement counts as finished, and how often you will check in.

Discuss a job loss, relationship change, relocation, or a need to sell, and write down what happens to the money in each case. Decide in advance what you would do if the child cannot pay, and whether you could afford to forgive the loan.

Ownership, lending, estate, tax, or relationship issues can require a qualified professional.

Is another form of help more sustainable?

You might help with a smaller amount, fund a defined cost, provide temporary housing, or help compare options. Local nonprofit or government programs can offer a second mortgage on special terms for the down payment, and you can help your child find and apply for one.

Sources checked October 5, 2026. All worked examples are illustrative, not survey estimates. General financial education, not individualized financial advice.