By Don Reisinger
January 4, 2019

The number of home buyers turning to their parents for help in affording their houses is on the rise.

In its annual report, the Federal Housing Administration (FHA) revealed that more than 26% of people who received an FHA-insured mortgage in the 12-month period ended in September had family assistance. That was roughly the same as the prior year, but up from 22% in 2011, according to the data. The Wall Street Journal earlier reported on the jump.

FHA-backed mortgages are often used by brokers and banks that have riskier mortgage applicants. Those who are approved for an FHA mortgage often have lower credit scores or might be buying their first homes. FHA mortgages also come with lower down payment requirements, allowing borrowers to pay as little as 3.5% of a home’s purchase price to buy it.

Turning to parents or other loved ones for help is not necessarily a new practice, but it appears to be on the rise. It’s unclear from the report what might be driving the increase in family participation, but rising home costs and higher debt might be the cause. In fact, the FHA report found that its applicants had debt equal to 43% of their income. The average borrower’s credit score was 670, its lowest point since 2008.

Looking ahead, there’s no sign of those trends changing. Including family and non-family help, 39% of borrowers received some form of down-payment help in the 12-month period the FHA analyzed. In 2011, 30% of borrowers could say the same.

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