How to Buy a Home for Your Parents in 2025: 5 Smart & Legal Ways That Work

If you’ve been thinking about buying a home for your parents, you’re not alone—and you’re definitely not crazy. In 2025, more adult children than ever are stepping up to help their parents find housing stability, especially with rent prices soaring and retirement savings falling short.

I’ve spoken with families who are doing this out of love, necessity, or both. Sometimes it’s about giving back after years of support. Other times, it’s a practical move—helping aging parents avoid financial stress, live closer to their grandkids, or downsize into a safer, more manageable space.

But here’s the problem: most of the advice out there is either too vague, too legalistic, or clearly written by someone who’s never actually done this. I’ve seen article after article talk about “co-buying” or “gifting down payments,” but they skip the hard stuff—like how to protect your finances, structure ownership, or avoid painful family misunderstandings.

This guide is different.

I’ll walk you through five real, proven ways to buy a house for your parents—options people are actually using in 2025. Whether you’re looking to help them move into their own place, live with you under one roof, or create a shared financial plan that makes sense for both sides, there’s a path that fits.

And I’m not just listing options—I’ll show you where each one works best, what to watch out for, and how to avoid common (but costly) mistakes.

Let’s dig in—because helping your parents shouldn’t mean putting yourself at risk.

Option 1: Buy a Home for Your Parents Using the Family Opportunity Mortgage

Most people don’t even know this program exists, and yet it’s one of the best-kept secrets in real estate.

The Family Opportunity Mortgage is a little-known policy by Fannie Mae that lets you buy a home for your elderly parents as if they were living in it themselves. That means you can access primary residence mortgage rates—even if you already own your own home. It’s a game changer.

Unlike an investment property loan, which typically comes with higher interest rates and down payments, this option is treated like an owner-occupied loan. Your parents don’t need to be on the mortgage. You do. But the benefit is: you get better terms, more flexibility, and you’re helping them age with dignity.

To qualify, here’s what lenders usually require:

• Your parent must be unable to qualify for a mortgage on their own (due to income or credit).
• The home must be intended for them to live in full-time.
• You need to provide proof of relationship (birth certificate, tax docs, etc.).
• You must meet standard credit and income requirements for the loan.

According to The Mortgage Reports, some lenders ask for a 5–10% down payment, and expect a credit score of 620 or higher. But every lender is a bit different—so talk to one who’s familiar with this specific loan type.

And if you want a full breakdown of how this works—including pros, cons, and common mistakes—Investopedia’s guide gives a solid, unbiased overview.

This isn’t just a financial move. It’s a way to help your parents feel safe and supported—without straining your own future in the process.

Option 2: Co-Borrowing or Co-Signing on a Conventional Mortgage

One of the most common ways families try to buy a house for their parents is by either co-borrowing or co-signing on a mortgage. At first glance, they sound the same—but they’re not, and the differences really matter.

If you’re a co-borrower, you share full financial responsibility. Your name is on the loan and the title. You have equal ownership, and your credit and income are considered in the application.

If you’re a co-signer, you’re only there to help the loan get approved. You don’t get ownership rights, but you’re still on the hook if the mortgage isn’t paid.

Here’s why that matters:

• Your credit is affected either way.
• You’re adding debt to your name, which could hurt your ability to borrow in the future.
• If there’s no written agreement, things can get messy later—especially around inheritance, repairs, or resale decisions.

Unfortunately, most articles gloss over these nuances. They’ll tell you to “talk to a lender” or “consult a financial advisor,” but that’s not always enough. You need to go in knowing what role makes the most sense for your situation—and how to protect yourself.

Checklist to consider before co-signing or co-borrowing:

• Is your parent able to contribute to the down payment or monthly costs?
• What happens if one party wants to sell in the future?
• Will the deed reflect shared ownership, or just the loan?
• Have you discussed estate planning, wills, or power of attorney?

This method can work, but only if the expectations and ownership terms are crystal clear from day one.

Option 3: Gift of Equity or Buying Your Parent’s Home Directly

If your parents already own a home, buying it directly from them can be a smart move—both emotionally and financially. But it needs to be done right.

One strategy that often flies under the radar is a gift of equity. That’s when your parents sell you the home for less than its market value—and “gift” you the difference as equity. It reduces how much you need to borrow, and can lower or eliminate the down payment requirement entirely.

For example, if the home is worth $300,000 and they sell it to you for $250,000, the $50,000 difference counts as your gift of equity. You’re still getting a loan on $250,000—but it’s like starting with instant equity.

That sounds great, but here’s what many people miss:

• The gift must be properly documented with a gift letter.
• You’ll still need an appraisal to confirm value.
• The IRS has gift tax thresholds—in 2025, gifts over $18,000 per person per year may need to be reported.
• You must work with a lender who’s familiar with this kind of structure.

There’s also the emotional side. Sometimes the sale price leads to awkward conversations between siblings or creates tension over “inheritance fairness.” Clear communication and paperwork can prevent that. If the house your parents own is older, make sure you read these 10 must-know tips before buying an older home—so you don’t take on a surprise repair burden.

This approach is especially powerful for families who want to keep the home in the family, while helping parents downsize or move to assisted living.

Whether you’re buying the home to live in or renting it back to your parents at low cost, a gift of equity is worth exploring—if you’re willing to handle the paperwork and legalities carefully.

Option 4: Paying Cash or Using Savings / Family Loans

Sometimes the simplest solution is the one people overlook: just buying the house outright—no mortgage, no banks, no long approvals.

If you or your parents have saved enough, paying cash for a home can seriously reduce stress. There’s no risk of denial, no loan fees, and closings are faster. In competitive markets, cash offers also carry more weight with sellers.

But here’s where it gets tricky—especially with family money involved.

Many people use their own savings, or borrow informally from relatives to fund the purchase. That’s fine, but if you’re using intra-family loans, you need to treat it like a real loan. Otherwise, things can go sideways fast.

The IRS expects proper documentation and a minimum interest rate (known as the Applicable Federal Rate). If you don’t do that, your “loan” might be considered a taxable gift—which can create a mess later.

Also, what happens if someone needs the money back early? Or if a sibling feels left out of the process?

The key is to document everything:

• Use a promissory note with clear terms (amount, interest, repayment plan)
• Discuss repayment expectations openly
• Get legal advice if you’re moving large sums or using retirement accounts

In one piece from Bank of America Private Bank, they highlight how formalizing family loans can preserve relationships, not damage them.

Cash or not, when you’re mixing love and money, clarity beats assumptions—every single time.

Option 5: Multigenerational Living & Shared Home Financing Models

If the past few years taught us anything, it’s this: families are coming back together under one roof—and not just for emotional support. Multigenerational living has become a strategic solution to the housing crisis. If you’re seriously considering living together under one roof, you’ll want to explore the 6 things you’ll love and hate about buying a home with your parents—because it’s not always as easy as it sounds.

In fact, families across the country are combining finances to buy larger homes, build ADUs (accessory dwelling units), or renovate basements into in-law suites. It’s about creating space where both independence and care can co-exist.

Here’s why this matters:

• Parents can live close, without fully moving in
• Adult kids can build equity while providing care
• Total housing costs are shared, reducing pressure on both sides

But like every other option—it only works well when planned properly.

You’ll want to:

• Discuss roles: Who pays what? Who’s on the title? Who gets what in the end?
• Draft a co-ownership agreement if both generations are putting in money
• Consider zoning laws if building an ADU or splitting space

A 2025 report from The Title Report shows that families with children are now twice as likely to seek multi-gen homes with aging relatives in mind.

This model also allows for future flexibility. Maybe you rent the ADU later. Maybe your kids move in when they’re older. Or maybe this is just a short-term solution while everyone figures out their next chapter.

Whatever the reason, shared living isn’t just about survival anymore. It’s a smart, intentional way to turn family challenges into long-term value.

Which Path Fits Your Family Best?

I get it—five different strategies can be a lot to absorb. That’s why I’ve put together this quick comparison table to help you weigh the pros and cons at a glance.

Use it as a gut check. What makes sense for your financial situation, your parents’ needs, and your family dynamic?

Important note:

No matter what path you choose, poor planning around family roles can backfire. In some cases, adult children have ended up in court—or deeply regretting verbal agreements.

News.com.au report says that One financial commentator from Australia even called it “the $2.7 billion parenting mistake” when families buy homes without a formal plan.

This isn’t about fear—it’s about being smart and intentional from the start.

Before You Start: 5 Must-Do Steps to Avoid Regret

Too many people jump into this process emotionally—but emotion doesn’t keep families safe. Structure does.

Here’s a practical checklist I recommend before signing anything:

1. Have the hard family conversations
   • Discuss expectations, boundaries, and what success looks like.
2. Check your financial health
   • Review credit, income, existing debt. Know what you can realistically afford—and what you can’t. If you’re new to the homebuying process in general, it helps to follow these 10 simple steps to buying a house in 2025—from mortgage pre-approval to closing day.
3. Talk to a lender and a financial advisor
   • Don’t rely on blog posts alone. Lenders can tell you what programs fit. Advisors can guide you through tax consequences and retirement implications.
4. Put legal agreements in writing
   • If it’s a gift, make it official. If it’s a loan, draft a promissory note. If it’s shared ownership, have a real co-ownership agreement. This protects everyone, including your parents.
5. Learn from others’ mistakes
   • Experts warn about informal arrangements breaking families apart. That News.com.au case showed how verbal promises led to resentment, confusion, and even legal fallout. It happens more often than you think.

Final Thoughts: There’s No One-Size-Fits-All Answer—And That’s Okay

If you’ve made it this far, you already care more than most. That matters.

Buying a house for your parents isn’t just a financial move—it’s a deeply personal one. You’re not just trying to get them a roof over their head; you’re trying to do right by them, without compromising your own future. And that’s a tightrope.

So here’s what I’ll leave you with:

There’s no “best” way to do this. There’s only the option that fits your family’s values, your financial situation, and your legal comfort zone.

• If your goal is to give them independence without putting your own credit on the line? Maybe the Family Opportunity Mortgage is a smart fit.
• Want something cleaner and faster? A direct cash purchase with formal paperwork might get you there.
• Looking to build something long-term, together? Multigenerational living could be your answer—but only if everyone’s on board with the plan.

Whatever you choose, be honest—with yourself, and with your parents. Talk early. Document everything. And don’t rush because of guilt or pressure.

You’re doing something generous. Just make sure it’s sustainable too.

Your turn—what’s your biggest concern when it comes to helping your parents with housing? Drop it in the comments or share your story. You’re not alone in this, and your experience might help someone else make a better decision too.

Looking for more guides like this? Visit Build Like New for practical, real-world advice on smart home decisions and family-focused financial planning.

Disclaimer: This article is for informational purposes only and does not constitute legal, financial, or tax advice. Always consult with a licensed professional before making major financial decisions.