What The Heck Is A Nepo-Homebuyer In Utah?

Have you heard of the term "nepo-homebuyer"?

It's quickly becoming a thing in our modern world.

See, the issue many young people are running into is the fact that getting into a $380,000 starter home at six or seven percent interest has become pretty much impossible for someone making 15-20 bucks an hour

Even if that young couple has both partners working and they both make $20 an hour, the monthly household income is less than $7,000 a month. With no money down that means a starter home (maybe a manufactured home or a condo for that price) would have a payment close to $3,000 a month.

Ouch.

That's where a "nepo-homebuyer" becomes necessary.

A 'Nepo-homebuyer' is someone who uses a significant loan or gift from family members (usually parents) to make a large down payment, thus making the house payment affordable.

According to Forbes.com, "An eye-popping 38% of recent homebuyers under age 30 used either a cash gift from a family member or an inheritance in order to afford their down payment.

"First-time homeownership has become increasingly expensive, which has shut the door to homeownership for young people without family money. As a result, a large share of young homeowners can be labeled “nepo-homebuyers,” meaning they received family money to purchase a home."

For instance, taking that same $380,000 home, but applying a $100,000 down payment would bring the house payment down from near $3,000 a month to about $2,000 a month for a 30 year fixed mortgage.

While that doesn't make the payment cheap, it often makes the difference between being able to get a home or having to stay in an overpriced rental.

If the couple makes $6,800 a month, the net difference between the two payments is monstrous -- $1,000 to buy diapers, groceries, clothes or other necessities.

There are a couple of issues with the "nepo-homebuyer" model.

First, the family member or parent has to have a lot of excess money -- and usually kids have no idea how much money their parents have.

Second, there are a bunch of complicated feelings that come with this kind of relationship. Was the money a gift? Do I have to repay it? Do the parents then have a say as to how I raise my kids? Do I have to give them a cut if I sell my house? Can they really afford it? ... and the list goes on.

But even with these potential issues, we've gotten to the point that the only way many young families will ever get a home of their own is with a little bit of help, a little bit of "nepo-homebuyer" help.

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