Your parents want you to succeed in life. They want you to live the American dream—to have a better life than the one they have.
(They also don’t want you to live in their basement when you’re 30.)
Here’s the plan: Mom and Dad give you a loan so you can get a mortgage and buy a house, right? Wrong. It doesn’t work that way anymore.
Before the housing crash in 2008, banks were handing out mortgages as if they were flyers for happy hour at the local bar. It was something like this:
Mortgage lender: “How’s your credit, sir?”
Prospective buyer who can’t afford a house: “Oh, it’s atrocious.”
Mortgage lender: “No problem. And how much do you make per month?”
Prospective buyer who can’t afford a house: “Well, that’s a tricky question. It varies month-to-month, you know?”
Mortgage lender: “Oh, I understand that. Do you at least have proof of any kind of regular income.”
Prospective buyer who can’t afford a house: “No.”
Mortgage lender: “Well it looks like you’ve been approved for our special sub-prime mortgage. Here’s hundreds of thousands of dollars.”
But now you are guilty until proven innocent. The moment you walk inside a bank, you have to prove to them with irrefutable evidence that you are a fiscally responsible American.
Going back to the scenario with a loan from your parents: think about what you’re doing! You are borrowing money so that you can borrow money. That’s a major red flag to a mortgage lender.
They can see from where the money came. They can see how long it has been in your account. They can see whether or not the numbers “add up”.
Your best bet is to work hard and save your down payment. I’m sure you’ve heard the saying “work smarter, not harder”. Well, that’s partially true…you have to work hard in order to get the financial backing to be able to work smarter.
Wealth is built brick by brick—slowly and steadily. To quote Dave Ramsey: (he has a net worth of $55 million so I’d pay attention) “The tortoise wins the race every time.”