Before you go to the Bank of Mom and Dad

Last summer, after years of bouncing from rental to rental, Brianna Racoosin bought her dream home, a sunny two-bedroom condo in East Williamsburg, Brooklyn. To cover the $1.1 million price tag, Racoosin, an art teacher at a public high school, didn’t take out a mortgage; she paid in cash, thanks to a trust set up by her parents.

“I never thought that I would use the money to buy until I had a partner or a family,” Racoosin said. “But then I was like, what’s the point of waiting?”

While generational wealth may be a subject of contempt, and envy, Racoosin, 30, is far from alone when it comes to relying on family money to get a leg up in the housing market. About 1 in 5 Generation Z and millennial homebuyers in the United States relied on gifts from family to help with down payments, according to a study released by Redfin last month.

“A lot of people don’t want to talk about gifting, even though everyone has help,” said Danielle Nazinitsky, an agent with Decode Real Estate who worked with Racoosin.

In a historically tight housing market, parental support can help put homeownership within reach. Still, there’s a lot to consider before you turn to the Bank of Mom and Dad. Here’s what you need to know.

Why are homebuyers turning to their parents?

A perfect storm of factors is making it especially difficult for prospective homeowners in the millennial and Gen Z age groups to buy using entirely their own means.

“It’s the trifecta of high rates, high prices and rising insurance costs, which just makes it really hard for somebody when they’re starting out,” said Bill Banfield, chief business officer of Rocket. “And this is all exacerbated by lower inventory levels.”

Glennda Baker, a real estate broker based in Marietta, Georgia, outside Atlanta, wrote in an email that there was “fierce competition” for first-time buyers in her area and in other markets. “More than 30% of our first-time homes are being gobbled up by private equity and hedge fund buyers,” she said.

Even if someone has squirreled away enough money for a down payment without help, the average homebuyer would still struggle to afford the mortgage payments. A median-income American family would need a $17,000 salary increase to afford an average home, according to a Zillow study released this summer.

How can parents help?

There are a handful of ways parents can help their children buy a home, each with its own set of considerations.

The most common, and the most straightforward, is a cash gift, whether that’s by chipping in toward a down payment or funding the entire purchase. Under the tax code, in 2025, an individual can gift up to $19,000 (the limit for married couples is $38,000) without having to pay taxes. If parents spend more, they’ll have to file a gift tax return and the amount will count toward their lifetime exemption, which in 2025 is $13.99 million for individuals.

There are a few drawbacks to cash gifts, said Deanna Cascella, a wealth and estate planning strategist at Morgan Stanley, including a lack of financial protection: No one is stopping your child from, say, embarking on a spending spree instead of purchasing a home.

“But the pro is that it’s really simple and you’re done,” she said.

If you’re looking for more guardrails, a less common option is a gift in trust. In this situation, the trust is the owner of the property, not the child. While a more complicated option, it’s a strategic one as far as estate planning is concerned.

Some parents may opt to co-sign a mortgage with their children to increase their approval odds. But that also has risks. “Both the parent and the child are responsible and obligated to the loan,” Banfield said. “If something goes wrong, it affects both people’s credit.”

Parents can also choose to loan their children money, which could have better terms than a mortgage rate. For this option, a lawyer is necessary. “It’s pretty simple to administer, but it does introduce a formality and makes sure that the I’s are dotted and the T’s crossed,” Cascella said.

How do you start the conversation?

If a future homebuyer is thinking of approaching their parents for help – or conversely, a parent is thinking of helping their child – it’s best to talk candidly and early.

“There are a lot of personal considerations that parents and kids need to talk about, and need to talk about openly, before they make these arrangements, because the home purchase can affect people right now and then long into the future,” Cascella said.

Before broaching the conversation, do your research.

“There’s nothing wrong with asking for help. But you want to do it in the appropriate way,” said Ramit Sethi, a personal finance expert who hosts the “Money for Couples” podcast. “You always want to explain why you are asking – and then, of course, you want to give them an out.”

Parents, too, need to decide if lending a helping hand makes sense for them. “As you age, there are a lot of unexpected expenses that might come up, so ensuring that your financial support isn’t going to inhibit your long-term financial health is really important,” said Amanda Shur, a housing trends expert at StreetEasy. “It’s really important that parents speak with a financial adviser to make sure that they’re gifting the money in the most prudent way.”

Also, consider your relationship with your parents and the level of involvement you’re comfortable with. Would they hold the contributions over your head? Would they expect to be present at every house tour or have final say over the purchase?

“Emotionally, I always advise setting boundaries up front – who’s in charge of the decisions, how communication will work and whether this is a gift or a loan,” Baker said.

Matt Laricy, an agent in Chicago, has seen family dynamics go awry. “Sometimes it’s like watching the Kardashians,” he said. “Like, you don’t want to see it, but it’s kind of fun being in the middle of it.”

Who needs to know?

If you’re accepting a gift from your parents, a few parties need to be in the loop.

It’s always a good idea to keep your real estate agent informed. This will help the agent find homes within your reach and also exclude options that may prohibit gifts (some New York co-op buildings, for instance, have rules against gifting).

If a cash gift goes toward your down payment, you’ll likely need to document it with your lender in the form of a letter. This assures your lender that the money is a gift, not a loan. Make sure the money is given in a single transaction and that it lands in your account early. After 60 days, the funds are considered “seasoned,” which helps confirm to the lender that the funds are truly yours, according to Rocket Mortgage.

Then, depending on the size and nature of the arrangement, there’s the IRS. It’s always advisable to consult a financial adviser, a tax accountant and an estate lawyer.

What about everyone else?

Who you tell beyond the necessary parties is subjective. It’s wise, for instance, to be transparent with siblings to avoid conflict. If you’re married, it’s important to keep your spouse in the loop, whether you’re receiving the gift or the one doing the gifting.

When it comes to friends and peers, though, sharing that your parents helped you buy your house might be a murkier decision. For Racoosin, who relied on a trust fund to purchase her house, it was complicated.

“It is something that I felt guilty about,” she said. “There’s so many people that are working really hard that aren’t able to do this. And so, like, who am I to say that I own this place?”

Those feelings, Sethi said, reveal the love-hate relationship Americans have with family money.

“It’s one of the most taboo topics in personal finance,” he said, “yet, so many people orient their entire financial lives to give wealth to the next generation.”

Before diving into homeownership, Sethi said, it’s important to get real with your finances and refrain from judgment – whether your parents are giving you a boost or not.

This article originally appeared in The New York Times.