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Dear MarketWatch,
My son is 36 and is an unemployed veteran on disability. He also suffers from depression. Because of this, it has been hard for him to keep a job even though he has a degree in finance.
I’m about to get an inheritance and was thinking about helping him with a down payment on a condo or house, so that he won’t have to worry about having a place to live. Right now, he is couch-surfing.
I believe in a living inheritance. Giving some money to my kids before I’m gone so I can see the benefits they are getting from it.
What is the best way to make this happen? Have him first try to see if he can get financing through a VA loan? I’m concerned because he has no job or anything to show that he’s faithfully paid rent, though he has to his friends. Finance the condo myself and rent to him? Give him a hefty down payment so his rent is low if he is able to get a loan?
I have a teacher pension, so I think I can spare some money from this inheritance to help him out. What would you suggest?
Sincerely,
Concerned Mother
‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Jacob Passy at TheBigMove@marketwatch.com.
Dear Concerned Mother,
It is an unfortunate reality that many of the people who have served in our nation’s military find themselves without stable housing after their service ends. As of January 2020, roughly 37,000 veterans were homeless, over a third of whom had no shelter whatsoever. That number had actually risen between 2019 and 2020 — and that was before the pandemic caused millions of Americans to face housing insecurity as a result of the economic downturn.
Given what so many of his peers have faced, I’m sure your son would happily welcome any support you are able to extend him. He is lucky to have a mother who is willing to use some or all of windfall such as your upcoming inheritance on him and his needs.
But before I delve into how I think you should consider using that money, I want to make sure that you and your son are fully aware of the housing assistance that may be available to him.
For instance, the departments of Veterans Affairs and Housing and Urban Development run a program whereby HUD housing vouchers are combined with VA support services to help homeless veterans find permanent housing. The rental assistance vouchers are provided by public housing authorities to homeless veterans who are eligible for VA health care services.
That’s just one of multiple programs the VA offers to help veterans struggling to secure housing. To start the process of receiving this support, he could contact his local VA facility or phone the National Call Center for Homeless Veterans at 1-877-4AID-VET.
“Homeless veterans can contact a national hotline (1-877-4AID-VET) to learn about housing assistance programs that can support them.”
Dealing with government bureaucracy is a common challenge veterans face in receiving the benefits they are due — and it can be all the more difficult for someone without secure housing who is already working on treating their mental health and managing a disability. To that end, you might want to consider what support you can provide him in receiving these benefits. Making a phone call or accompanying him to a meeting with a case manager could go a long way toward making the process easier and more comfortable for him — and it wouldn’t cost you much.
That said, the two of you very well may already be doing all of this, so I understand why you would be interested in helping him out in another way. While homeownership is a goal for many, I don’t know that it’s necessarily the best route for your son at this point.
Disabled veterans do have access to additional benefits through the VA loan program that are meant to make the process of buying a home easier for them. If a veteran’s disability is related to their service and they are being compensated for it, they are exempt from paying the VA funding fee that all other loan applicants must pay. That can save these veterans thousands of dollars.
Additionally, disabled veterans can count their disability income toward their overall income for loan qualification purposes, which isn’t the case with other mortgage programs. They might also be entitled to exemptions from property taxes.
“Disabled veterans may be exempt from certain mortgage closings costs and property taxes.”
However, lenders do review a veteran’s finances to ensure they can repay the loan they will be taking out.
“Getting a VA loan with bad credit really depends on your definition of ‘bad credit,’” Veterans United Home Loans notes on its website. “The VA doesn’t set a minimum credit-score requirement, but lenders might want to see a 640 mortgage credit score or higher to secure financing.”
So while money toward a down payment would help reduce the cost of owning a home for your son by reducing the amount he pays in interest and potentially getting him a better rate, he may not have a strong enough credit score or high enough income to qualify.
For that matter, the jump from homelessness to homeownership may be a challenging one for him to navigate. Sure, you would have helped him with the down payment, but given his challenges in maintaining steady income he could encounter difficulty making his monthly payments if his disability income doesn’t cover them. Plus, as a homeowner, he would be responsible for maintenance for the new home. The last thing you’d want is for this gift to create more headaches down the road.
Buying a condo yourself and then renting it to him could be an option. But keep in mind, renting to family can generate uncomfortable situations and lots of grief for all parties involved. If he couldn’t afford the rent in a given month, would you be able to forgo that payment? What if he wasn’t able to afford rent for multiple months? I can’t imagine you’d want to evict him, but you wouldn’t want the situation to jeopardize your own finances in the process.
Here’s what I would do: Talk to your son about finding an affordable rental where he wants to live. He might have trouble passing a credit check and meeting the income requirements for an apartment, so consider being a guarantor for him. You could give him some money to cover the costs associated with signing a lease, which can include first and last months’ rent, a security deposit and a broker’s fee.
Presuming you still have money left over, then consider whether you could cover a portion of his rent each month for a set period of time. You may also want to set some money aside as a rainy day fund for him, so that you can be there as a safety net in the future.
This would provide him with stable housing, and research has shown that having a safe roof over your head can help significantly in finding a job. Over time, hopefully he will find himself in a better place, financially and emotionally, and then he can begin on his own path toward homeownership. And you can be happy knowing that your support — in whatever form it ends up taking — helped him significantly on that journey.
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