Investing/Kids

Hey Taylor: My son has been with a great company for 10 years and was recently relocatTaylor Kovar ed. He has been renting for the past 10 years but now wants to invest in a house since he is settling down and interest rates are low. He doesn’t have a lot of money saved up to use as a down payment, so I’m thinking about giving or lending him the money. What do you think? — Susan Hey Susan: Coming up with a down payment is often the greatest barrier to overcome for firsttime home buyers. As a general principal, I think borrowing money from friends and family should be done very cautiously. All loans should involve a legal contract, and mixing finances with personal relationships can definitely make the holidays awkward if not done properly. Plus, having this additional loan could negatively influence your son’s debt-to-income ratio, which will be used to calculate how much he can borrow toward a house.

You can definitely gift him money toward a down payment, but only do so if you consider it a nostrings-attached gift. The lender for his loan may actually require you to sign a letter affirming that it is truly a gift and will not need to be repaid. In some cases, his required down payment could be as low as 3.5% for an FHA loan, but if he can come up with a 20% down payment, he can save on closing costs, interest rates and bypass needing mortgage insurance, which could save him hundreds of dollars a month.

There are many down payment assistance programs out there at the federal, state, and local levels that he will want to consider. These incentivize settling down in certain areas; provide loans and grants to law enforcement officers, teachers, firefighters, etc.; or help purchase and renovate foreclosed properties. If he has enough money in an IRA and this is his first house purchase, he could potentially withdraw up to $10,000 penalty free to use on the down payment. He will have to pay income tax on this money and there are still a few requirements he has to meet, but this can be a great option if he is short on funds.

This final option should only be used after he speaks with a financial professional about the details of his situation, but if he is still short on cast, he might see if taking a loan against his 401(k) is an option. This is rarely a good choice, but it can make sense for some people who are just a little short of the money for a full down payment. Purchasing a home is a big decision, so I highly recommend your son sit down with a financial professional before making a final decision, as they can show him this decision will affect his future. Good luck and happy house hunting! Legal Disclaimer: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. To submit a question to be answered in this column, please send it via email to Question@GoFarWithKovar.com or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901. It seems to be generally true that as one gets older, the habit of reminiscing develops. Looking back seems John to be a function Rosemond of getting closer to the final curtain. The closer the latter, the more of the former one indulges in. In that regard, I indulge in an optimistic amount. I often reminisce about my paradoxical childhood. My parents were a mess and so were their marriages, of which, between them, there were four. By any objective measure, I should not have turned out well. My mother and stepfather – he came into my life when I was seven – may have been in love but they didn’t seem to like one another at all. That makes for a certain amount of constant tension. In my case, the tension was interspersed with periods of sheer chaos. I spent a lot of time in my room, voluntarily. . During her single parent years, my mom was the parent the proverbial doctor ordered. After her remarriage, she came apart at the seams, but for all her unraveling, she still managed to do some things right, the most significant of which was she let me find my own way. Whether by design or a lack of emotional resources, she left me alone as I wandered rather aimlessly over the landscape of young adult life. A straight-A student in high school, I went to college, promptly joined a rock band (lead singer) and two years later had a GPA of 2.1, which in those days was twotenths of a point away from Vietnam. Neither Mom nor the ersatz father figure ever said a thing. Today’s parents, by and large, would be calling the Dean, calling professors, making trips to campus, making early morning calls to get me out of bed, “helping” with term papers (i.e., serving as ghost writers), sending care packages, hiring tutors, trying to get me diagnosed with something sufficient to obtaining academic dispensations on my behalf…in short, micromanaging and enabling from afar. No such things emanated from Westchester, Illinois. Only a benevolent silence. Rarely did I even come home during breaks, and rarely did they even ask where I was going. At the end of three years in school, I was still considered a sophomore. It was then that a psychology professor took interest in me and pulled me out of the ditch to which I’d become complacently accustomed. Serendipity? Fate? God’s hand? Who knows? In any case, I married, became a father, got into grad school, finished with honors, and figured out the rest. The moral of the story: Sometimes, good parenting consists of doing nothing but biting one’s nails to the quick in agonizing secrecy. I talk to a good number of parents who are dealing with young adult children who, more or less, fit the above description. Most of them are trying to fix it. Most of them are attempting to correct bygone parenting blunders that may or may not – probably may not – account for their children’s foibles. They are, to a person, wasting their time and grinding themselves down to the nub in the process. At this point in their children’s lives, etiology is not the issue and any speculations along those lines, even coming from a mental health professional, are purely speculative and unverifiable. Said parents simply need to stop trying to fix it. Which, truth be known, is the most difficult of all parenting hurdles to clear. The good news, for those who manage to clear it: It will most likely be the last. Family psychologist John Rosemond: johnrosemond.com, parent guru.com.

John Rosemond has worked with families, children, and parents since 1971 in the field of family psychology. In 1971, John earned his masters in psychology from Western Illinois University and was elected to the Phi Kappa Phi National Honor Society.