The fastest route to buying a first home may run through family members, according to a Rocket Mortgage analysis.
Parents help in many ways, including offering their kids down payment money or loans. And
when they don't have cash readily on hand, they're increasingly offering their credit.
Since 2018, total home purchases among buyers younger than 35 have fallen 15%, while purchases involving an older co-applicant over 55 have risen roughly 3%, the mortgage company found after analyzing Home Mortgage Disclosure Act data for 2018 to 2025.
"Parents understand the stability a home provides, along with the opportunity to build equity and wealth over time," said Bill Banfield, chief business officer at Rocket Mortgage. "Many don’t want to see their children delayed or left behind, so they’re willing to join the loan as a co-applicant, adding income to what the family can put behind the purchase."
What is a co-applicant?
A co-applicant serves as an additional buyer listed on a loan application, separate from the primary applicant.
"When a parent or relative joins a loan as a co-applicant, their full financial picture becomes part of it," said Banfield. "In the highest cost markets, that combined strength may help put a home within reach. It also means each person is responsible for the full loan amount, so it’s important to have conversations about expectations upfront."
Pros and cons of becoming a co-applicant
The biggest positive is helping your child achieve part of the American dream.
"With the right plan in place, co-applying for a mortgage with your child can be a smart way to help them become a homeowner sooner, especially in today's market where affordability is a real challenge," said Mary Lee Blaylock, president of Coldwell Banker Affiliates. "Adding a parent’s income and credit to the application can help a first-time buyer qualify for a loan they couldn’t get on their own, and start building equity years earlier."
But there are some caveats.
"As long as the younger purchaser makes all the mortgage payments, there's no harm to the parent," said Melissa Cohn, regional vice president of William Raveis Mortgage. But if co-applicant parents want to buy a home for themselves, their co-applicant status on their child's home will count against them when seeking a new mortgage, she said.
To exclude the child's mortgage from the parent's debt-to-income ratio, the parent will have to show that the child made 12 consecutive months of on-time payments, Cohn said. If the child misses a payment, the 12-month period starts over once payments resume. A child's missed payment also becomes the co-applicant's responsibility, meaning the parent may have to make a payment in those cases.
Before becoming a co-applicant, families should devise an exit strategy for the parent and when that could happen. "Getting off the loan usually means your child has to refinance on their own, so talk through the exit plan before you sign," Blaylock said.
More parents are saving for their kids' down payments
Homeownership remains at the heart of the American dream, with nearly 9 in 10 Americans (89%) calling that an achievement, a Coldwell Banker Real Estate survey of 2,000 U.S. adults showed.
More young parents are beginning to save for their kid's down payment, much like they're saving for college, the survey found. Eighty-two percent of parents with kids ages 5 and under are saving, or have considered saving, for their child's future down payment, it said.
"For many families, buying a home has become a team effort that starts years before the first showing," Blaylock said. "Parents are thinking about their child's first home before kindergarten, and families are showing up for one another to help the next generation get the keys. Homeownership is still one of the most reliable ways families build wealth over time, so even with affordability as tough as it is right now, parents want to give their kids that head start."
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: How parent co-applicants keep the American dream alive
