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Real Answers

October 30, 1994

Q: My parents want to help us with the down payment through a loan, not a gift. How do we go about it?

A: There are several ways for them to lend you funds for the down payment either through a personal note, second trust deed or special programs that require them to pledge securities or other assets to the lender.

The terms of a personal note or second trust deed could require monthly or annual payments amortized over a period of time or require interest only with a pay-off at the time the home is sold.

Another way to tap parents is through special third-party lender programs. For example, the California Housing Finance Agency through North American Mortgage Co., Santa Rosa, has a "Generation Link" loan. The mortgage lets the home buyer get into a home for nothing down but the parents of the borrower must pledge 10% of the purchase price in the form of a second-trust deed on their house or in the form of eligible investment securities such as stocks or bonds. For more information, call North American at (800) 700-6262.

Another program is the Merrill Lynch's "Parent Power" home loan. If the person's mother or father opens an account with Merrill Lynch, they can use it as collateral (in place of the down payment) without actually taking the money out of the account. For more information, contact a local Merrill Lynch consultant or call (800) 854-7154, Ext. 8667.

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