Broker notes growing trend of cosigners and downpayment assistance amid affordability issues
Affordability struggles are mounting for American homebuyers – particularly first-time entrants to the market – as home prices continue to climb and inventory remains tight across the country.
With putting together the funds for a downpayment as challenging as it’s ever been, a growing trend in the mortgage market is seeing family members, or co-borrowers, step in to help the primary buyer put money down and take their first steps in the housing market.
The average US downpayment amount reached 13.6% in 2024’s first quarter, according to Realtor.com, for a median of $26,000. That was lower than their Q3 2023 peak of 14.7% and $30,400, but higher than the pre-COVID level.
What’s more, stubborn mortgage rates, and the prospect that rates could remain at or near their current level for the foreseeable future, don’t suggest much relief is on the way for buyers hoping to climb on to the housing ladder.
Rebecca Richardson (pictured top), of The Mortgage Mentor in Charlotte, NC, told Mortgage Professional America she was noticing a higher number of queries about cosigning on a mortgage as a result.
“I’m having more people buying homes with family, whether that’s non-occupant co-borrowers or with parents trying to help their kids get ahead – the kiddy-condo type scenario,” she said. “I’m seeing some more of that.”
Multigenerational construction – renovating an existing home to add new units and keep a family living on the same property – has been another way families are maneuvering those hurdles, according to Richardson.
Putting mortgages together for co-applicants isn’t necessarily more arduous than dealing with a single mortgagor. “It’s one more person and one more set of documents, but I don’t think it’s any more complex,” Richardson said.
“I’m just seeing more that people who are coming straight out of college, and their parents, know where the market’s going. They see that it’s not going to crash. We’ve been saying that since 2018, 2019 – people saying, ‘This can’t go on.’
“[The reality is] we have too many people and not enough homes. And so I think parents are kind of leading that charge a little bit: ‘Hey, kid, I want you to get ahead and get your foot in the door. I realize that you can’t, so let me help with the downpayment. Let me help you with co-borrowing’, to try to give them a leg up so they don’t feel like they missed the opportunity altogether.”
Redfin reports a 3.7-month supply of homes, the highest since early 2019. Sun Belt states lead with more listings, creating opportunities for buyers. https://t.co/WwHUwMW236#HousingMarket #RealEstate
— Mortgage Professional America Magazine (@MPAMagazineUS) February 21, 2025
How do gifted downpayments work for different loan types?
Non-streamline Federal Housing Administration (FHA) loans have strict criteria for who can supply a gifted downpayment, with eligible sources including relatives, close friends, employers, labor unions, and charitable organizations.
Fannie Mae- and Freddie Mac-conforming loans require the gift supplier to be related by blood, marriage, adoption, or legal guardianship, but at least 5% must be provided by the primary borrower if they’re putting less than 20% down and buying a home with two or more units or a second property.
But VA loans, by contrast, can be provided by nearly anyone – not just friends or family – and US Department of Agriculture (USDA) loans also don’t require a family member as a source, although a gift letter and full documentation showing the withdrawal and transfer are required for the latter.
Is there any relief incoming on the affordability front?
Realtor.com’s 2025 housing forecast suggests that prospective homebuyers aren’t likely to see prices drop lower across the country anytime soon. Mortgage rates are set to average 6.3% throughout the year – and hit 6.2% by the end of 2025 – while home prices are projected to tick up by 3.7%.
The good news is that more homes will probably come to market, Realtor.com said, with an 11.7% jump predicted before the end of 2025 and an uptick in new-home construction potentially on the way.
The big wild card in those projections, though, is the looming prospect of sweeping tariffs that could push home construction costs higher and drive up home prices as builders pass those hikes onto buyers.
The cost of building a home could spike by 4% to 6%, according to a recent CoreLogic analysis, if US tariffs on Canada go ahead – with the beginning of March marking the current date they’re set to come into effect.
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