We recently wrote in one of our blogs about pooling incomes in a household to obtain a mortgage. We mentioned that multigenerational households could be a trend in the housing sector. Changes in demographic behavior could lead to even more households becoming multigenerational. In this blog, we would like to assist you in thinking around some issues when you are looking into purchasing and renovating a home suitable for a multigenerational household.
AMI Lenders is a source for "pooled-income" mortgages in Houston
By now, you know that AMI Lenders considers the "pooling of incomes" from multigenerational households to provide a real estate loan. As previously mentioned, pooling incomes is well-suited for individual borrowers with limited resources, such as incomes below the median levels for their area or from non-traditional sources. For example, a single Mom and her mother can pool their income and creditworthiness together to qualify for a loan to purchase a home for the extended family.
Deciding on the specifics that a house suited for a multigenerational family should have
When hunting for a home suited for a multigenerational family, one should make a list and decide upon the amenities and features that the different family members WANT and those they NEED. Clearly, multigenerational living arrangements usually require more square footage to accommodate more people living under the same roof. You can share some communal areas, but you might also want your family to have some space to themselves for a healthier living arrangement.
- Try, for instance, to respond as a family to some or all the following questions:
- Do you want more than one living area (i.e., a family/media room), or is one enough? Is it large enough for everyone to watch TV comfortably at the same time? Is it feasible to have two TV rooms so that the older and younger generations can watch different shows or have different noise levels simultaneously?
- Does everyone have their meals at the same time, and If so, how big should the kitchen be? Or does everyone have their own eating schedules, and the size of the kitchen is not a significant factor?
- You can figure out beforehand how many bathrooms you'll need in order to avoid "bathroom gridlock" in the mornings and plan the addition of one before you move in. Or, if there are plenty of showers but no bathtubs, you may want to add one, as well.
- Since you are pooling incomes from two working adults, should you not have two master suites instead of just one?
- Do you need separate entrances?
- Also, it's essential to think about what the family will most likely look like in the future. Think about future needs like parenting, and give some thought to how much space will be required in the years to come.
Once you start house hunting, apart from the standard checklist of what to look for in a house, you could routinely ask yourselves these questions during the house visits:
- Can we make improvements to one of the properties with a tight remodeling budget? What improvements can you make yourself, and which ones will you need to hire a professional to do it?
- Does it have an attic that can be insulated and with plenty of light so that we can turn it into living arrangements? Is there mold? Mold is a definite sign that you should stay away from the attic and, most likely, the entire house.
- Will you need separate installations for utilities? For example, you could choose to have individual water heaters for specific bathrooms in the house (and separate fuel/electricity supplies to individual water heaters and other large appliances). That way, you could easily assess the expenses for electricity, hot water, and gas individually, making things a lot easier for everyone.
Deciding on the financial and legal arrangements
This is, perhaps, the most crucial detail you must work out in advance. Do sit down with everyone involved and decide upon the financial and legal arrangements so that everyone has a clear understanding of how each will pay for the mortgage and other renovation and ongoing costs. Some examples of the issues to be discussed include:
- Whose name(s) will be listed on the home's title? In what percentages will the home's equity be shared?
- How will the property be passed on in case of unfortunate death or departure? Here we always suggest that you have a Will drafted and signed by a Notary Public to make things easier in case a member passes away. Also, you may want to consider hiring a lawyer to set all the agreements on paper and convert them into legally binding documents.
- Decide on exactly when mortgage payments will be made every month and how to deal with anyone not making their payment on time. Should you have a 3-month cushion set aside in case someone cannot make their payment on time?
- How will the family members split expenses such as property taxes and homeowners' insurance?
- Which family members will be responsible for maintenance and upkeep costs? Do you need to establish a family or household emergency fund for unexpected damages or repairs?
- How will space in the home be used and shared? Would you like to have some special rules regarding, for example, parties and or get-togethers?
- Who will be responsible for which chores and the different home maintenance tasks? For example, mowing the lawn and/or raking the leaves.
- What happens if/when one party wants to move out or sell their ownership stake? Should you add an exit clause to the contract you created with the lawyers?
You will find out soon enough that working together and being clear on what you expect to happen, when and for how much. At the same time, sharing the wants and needs of everyone signing on the dotted line will help determine whether buying a home for a multigenerational family could be a huge advantage instead of a massive headache.
Summary
Buying a house with your parents/relatives or adult child can make homeownership affordable and accessible to individuals who would otherwise not qualify for a mortgage "individually". Your best-case scenario is if all parties legally and financially liable in the deal can agree on the terms and living arrangements before purchasing and applying for a pooled mortgage with AMI Lenders.
If you have decided to purchase a house for your family and are thinking of combining household incomes to qualify for a mortgage, consult with AMI Lenders, as we are one of Houston's fastest closers and but with the years of experience to become your best financial ally. We fund our own loans and can close our loans as fast as the law allows. Borrowers in Houston will also have difficulty finding lower rates for hard money or private loans than those we offer. We want our customers to succeed by taking advantage of the financial opportunities provided by multigenerational homeownership. Visit this page today and fill out an application for a combined income mortgage.
