Can Someone Buy Me a House? Financial & Legal Options

It is common for individuals to seek financial assistance or direct support to achieve homeownership. Many avenues exist to help someone acquire a home, each involving distinct financial, tax, and legal considerations for both the person providing assistance and the recipient. Understanding these arrangements is important for navigating the complexities of property acquisition.

Gifting Funds for a Home Purchase

Receiving a direct monetary gift can significantly assist with or entirely cover the cost of a home purchase. A gift, in this context, refers to money or property transferred without the expectation of repayment. The Internal Revenue Service (IRS) outlines specific rules for such transfers, primarily impacting the donor.

For 2025, the annual gift tax exclusion is $19,000 per recipient. This means an individual can give up to $19,000 to any number of people in a year without triggering gift tax reporting requirements or using up their lifetime exemption. Married couples can combine their exclusions, allowing them to gift up to $38,000 per recipient annually without reporting.

If a gift exceeds the annual exclusion, the donor is generally responsible for reporting it to the IRS using Form 709. The excess amount reduces the donor’s lifetime gift tax exemption. For 2025, the lifetime gift and estate tax exemption is $13.99 million per individual, meaning a married couple can shield up to $27.98 million from federal gift and estate taxes over their lifetime.

The recipient of a gift does not pay income tax on the funds received. The tax liability falls on the donor. If the gifted assets later generate income, such as interest or dividends, the recipient pays taxes on that income.

Mortgage lenders have specific requirements when gifted funds are used for a down payment or closing costs. They require a “gift letter” from the donor, which states the amount of the gift, the donor’s name, address, phone number, relationship to the borrower, and a statement that no repayment is expected. Lenders will also verify that the funds are either in the donor’s account or have been transferred to the borrower’s account.

Most conventional loans permit gifts from relatives by blood, marriage, adoption, or legal guardianship. Gifts from interested parties in the transaction, such as the seller or real estate agent, are not allowed for the down payment.

Lending Funds for a Home Purchase

When one individual provides a loan to another for a home purchase, formalizing the arrangement is key. A written promissory note should detail the loan amount, the interest rate, and the repayment schedule.

The IRS requires that private loans include an interest rate at least equal to the Applicable Federal Rate (AFR). If the interest rate charged is below the AFR, the IRS may recharacterize the forgone interest as a taxable gift from the lender to the borrower, which can have gift tax implications for the lender.

Securing the loan with the property through a deed of trust or mortgage provides the lender with a legal claim against the property if the borrower defaults. The lender reports the interest received as taxable income.

For the borrower, interest paid on a private loan secured by the home may be tax-deductible. However, an existing private loan can affect the borrower’s ability to qualify for a traditional mortgage. Lenders assess the borrower’s total debt-to-income ratio, and the private loan payments are included in this calculation, impacting the amount of a new mortgage for which the borrower can qualify.

Co-ownership Arrangements

Co-ownership allows multiple individuals to hold legal title to a single property, sharing both its benefits and responsibilities. Two common forms of co-ownership in real estate are Joint Tenancy with Right of Survivorship (JTWROS) and Tenancy in Common (TIC). Each form has distinct implications for ownership shares and what happens to the property upon the death of an owner.

In a Joint Tenancy with Right of Survivorship, all co-owners hold equal shares, and upon the death of one owner, their interest automatically passes to the surviving co-owners. This right of survivorship bypasses the probate process. Conversely, under Tenancy in Common, co-owners can hold unequal shares, and each owner’s share can be bequeathed through their will.

Co-owners share responsibilities for the property, including mortgage payments, property taxes, insurance premiums, and maintenance costs. These financial obligations are shared proportionally to their ownership interest. Being on the property title impacts both parties financially and legally, including potential credit implications if both are on a shared mortgage. Selling or transferring the property requires the agreement of all co-owners, and disputes can arise if clear agreements are not established upfront.

Mortgage Co-signing and Guarantors

When someone co-signs a mortgage or acts as a guarantor, they agree to be legally responsible for the mortgage debt without holding an ownership stake in the property. A co-signer strengthens the primary borrower’s loan application by adding their income and credit history. This differs from co-ownership, where individuals are on the property title and have ownership rights.

Co-signing carries financial risks and liabilities for the co-signer. If the primary borrower fails to make mortgage payments, the co-signer is legally obligated to cover those payments. This can negatively impact the co-signer’s own credit score.

The co-signer’s debt-to-income ratio will also include the co-signed mortgage, which can limit their ability to obtain other credit, such as a car loan or another mortgage. Lenders expect co-signers to have good credit and sufficient income to cover the mortgage payments if the primary borrower defaults.