Yes, a parent and child can buy a house together, and it happens often in expensive markets. The two decisions that shape everything that follows are how you take title on the deed and how you structure the mortgage. Both choices reach into taxes, estate planning, Medicaid eligibility, and each owner’s ability to borrow again later, so getting them right at the start is far cheaper than fixing them afterward.
Choosing How to Hold Title
The form of ownership on the deed controls what happens if one of you dies, how much of the property lands in someone’s taxable estate, and whether either of you can leave a share to anyone else. Two forms dominate parent-child purchases.
Joint Tenancy With Right of Survivorship
Joint tenants hold equal shares. When one owner dies, the survivor automatically owns the whole property without probate. A valid joint tenancy requires that both owners take their interest at the same time, through the same document, in equal shares, with equal rights to use the property.1Legal Information Institute (LII). Joint Tenancy If any of those conditions breaks down, the joint tenancy converts to a tenancy in common.
Skipping probate is the main draw. The limitation is the flip side of the same feature: you cannot leave your half to anyone else in your will. If a parent wants their share eventually split among several children, joint tenancy defeats that goal.
Tenancy in Common
Tenancy in common allows unequal shares. A parent who puts up 60% of the purchase price and a child who puts up 40% can split the deed to match. Each owner’s share passes under their own will or estate plan instead of transferring automatically to the co-owner. That flexibility fits families where the parent wants other children to eventually inherit their portion, but it also means both parties need a clear estate plan so the survivor is not stuck negotiating with siblings or an estate.
Structuring the Mortgage
Lenders treat the application differently depending on whether the parent will live in the house, and the loan program you choose drives the down payment, the rate, and who has to qualify.
Co-Borrower or Cosigner
A co-borrower shares responsibility for the payment and holds an ownership interest from closing day forward. FHA rules require all co-borrowers, including non-occupant ones, to take title and sign the mortgage note.2U.S. Department of Housing and Urban Development. What Are the Guidelines for Co-Borrowers and Co-Signers? A cosigner guarantees the debt but typically does not go on the deed. In most parent-child purchases both parties want a stake in the property, so co-borrowing is the usual path.
FHA With a Non-Occupant Co-Borrower
An FHA loan lets a parent who lives elsewhere co-borrow on a child’s home with as little as 3.5% down. To reach that minimum, at least one borrower needs a credit score of 580 or higher. Scores between 500 and 579 still qualify but require 10% down. FHA reads eligible family broadly enough to include parents, children, stepchildren, and grandparents.2U.S. Department of Housing and Urban Development. What Are the Guidelines for Co-Borrowers and Co-Signers?
Conventional With a Non-Occupant Co-Borrower
Fannie Mae also allows non-occupant co-borrowers, but the down payment is heavier. Loans run through Fannie Mae’s Desktop Underwriter cap at 95% loan-to-value with a non-occupant co-borrower, so at least 5% down. Manually underwritten loans cap at 90% LTV, or 10% down. The minimum credit score for a conventional loan is 620.3Fannie Mae. General Requirements for Credit Scores
The Family Opportunity Mortgage
Fannie Mae’s Family Opportunity Mortgage lets a borrower buy a home for a qualifying family member on primary-residence terms even though the borrower will not live there, which means a lower down payment and a better rate than an investment property loan. Eligibility is narrow: the program is aimed at buying a home for an elderly parent or a disabled adult child who cannot qualify for a mortgage on their own. A parent buying a home for a healthy, financially capable adult child does not qualify.
Combined Debt-to-Income
DTI is where many parent-child applications stumble. On manually underwritten conventional loans that qualify using only the occupying borrower’s income, Fannie Mae caps DTI at 43%.4Fannie Mae. Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction When the non-occupant co-borrower’s income is included, the manual maximum is 36%, though strong credit and reserves can push it to 45%. Loans underwritten through the automated system can reach 50%.5Fannie Mae. Debt-to-Income Ratios
How Co-Signing Affects Your Next Loan
This is where families get blindsided. When a parent co-borrows on a child’s mortgage, the full monthly payment lands on the parent’s credit report and counts against their DTI on any new application. It runs the same way in reverse for a child on a parent’s loan. If the parent later wants to refinance or the child wants to buy a second property, the shared mortgage can push DTI past what lenders will accept.
There is also the first-time buyer question. HUD defines a first-time homebuyer as someone who has not held an ownership interest in any property during the three years before the new purchase.6U.S. Department of Housing and Urban Development. How Does HUD Define a First-Time Homebuyer? A child who co-owns with a parent loses first-time buyer status for future FHA purchases until three years after giving up that ownership interest. Many state down payment assistance programs use a similar definition, so those may be off the table too.
Taxes While You Own Together
The IRS does not treat family co-owners any differently than strangers. What matters is who paid and who lived there.
Gift Tax on the Down Payment
If a parent covers the child’s share of the down payment, the IRS may treat that share as a gift. For 2026, the annual gift tax exclusion is $19,000 per recipient.7Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Anything above that in a single year triggers a Form 709 filing. Filing does not necessarily mean owing tax; it reduces the parent’s lifetime gift and estate tax exemption, which for 2026 is $15 million per individual.8Internal Revenue Service. What’s New – Estate and Gift Tax Very few families ever owe gift tax, but failing to file the form when required can bring penalties. A married couple can combine exclusions and give a child up to $38,000 in one year before any reporting kicks in.
Mortgage Interest Deduction
Each co-owner who is legally obligated on the loan and actually makes payments can deduct their share of the mortgage interest on Schedule A. If both are on the note and each pays half, each deducts half.9Internal Revenue Service. Other Deduction Questions The deduction follows actual payments, not the ownership percentage on the deed. If the parent pays the entire mortgage, the parent takes the full deduction, provided they are on the loan and hold an ownership interest. The child, having paid nothing toward it, deducts nothing regardless of being on the deed. Keep the payment records.
Capital Gains When You Sell
An owner who lived in the home for at least two of the five years before the sale can exclude up to $250,000 of gain, or $500,000 for married couples filing jointly.10Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence In the common arrangement where only the child lives in the home, only the child qualifies for the exclusion on their share. The parent’s share is taxed as a capital gain. On a property that has appreciated well, the parent’s share of the tax can run into tens of thousands of dollars. Families planning to sell eventually should build this asymmetry into the numbers from day one.
What Happens to Tax Basis When a Co-Owner Dies
Heirs generally get a “stepped-up” basis on inherited property, meaning the tax basis resets to fair market value at the date of death. How much of that benefit the survivor actually receives depends on the ownership form and on who paid.
For a parent-child joint tenancy, federal law includes the full value of the property in the deceased owner’s estate, minus whatever portion the survivor can prove they paid for with their own money.11Office of the Law Revision Counsel. 26 USC 2040 – Joint Interests The portion included in the estate gets the step-up.12Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent So if the parent funded the entire purchase and dies first, the child gets a full step-up on the whole property. If both split the cost equally, only the parent’s half steps up.
For tenancy in common, only the deceased owner’s share is included in their estate, and only that share gets the step-up. The surviving owner’s share keeps its original basis. If the property is sold soon after a co-owner’s death, the difference in capital gains tax between the two forms can be substantial.
Medicaid and Long-Term Care Risk
If the parent may eventually need nursing home care, co-owning a home with a child creates Medicaid problems that are hard to unwind. Medicaid long-term care eligibility requires limited assets, and real property counts. States set home equity limits for 2026 between $752,000 and $1,130,000.13Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards
Medicaid also runs a five-year look-back. If a parent transfers their ownership interest to a child for less than fair market value within five years of applying, the transfer can trigger a penalty period of ineligibility. Federal law carves out a limited exception for transferring the home to a child who lived there for at least two years before the parent entered a nursing facility and provided care that delayed institutionalization; transfers to a child under 21 or to a blind or permanently disabled child are also exempt. After the parent’s death, state Medicaid programs can pursue estate recovery to recoup care costs, though recovery is blocked while a child under 21, a blind or disabled child, or certain qualifying caregiving relatives live in the home.14Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets Families who see long-term care on the horizon should talk to an elder law attorney before signing the deed.
Put a Co-Ownership Agreement in Writing
The deed says who owns the property. The mortgage says who owes the bank. Neither says who pays for the roof, who gets to buy the other out, or what happens when someone loses a job. A co-ownership agreement is the private contract that fills those gaps. Without one, disagreements have no framework for resolution except a courtroom.
At a minimum the agreement should cover:
- Each owner’s share of the mortgage, property taxes, insurance, and any HOA dues.
- How major repairs like a roof or HVAC replacement are divided, and what happens when one owner cannot pay their share.
- A right of first refusal so the remaining owner can buy out a departing owner before the property hits the open market.
- How the property will be valued during a buyout: licensed appraiser, comparable sales, or an agreed formula.
- A mediation requirement before either party can file suit.
- What happens if one owner faces extended financial hardship.
Have a real estate attorney draft or review the agreement and get it notarized. A few hundred dollars in legal review is cheap next to the cost of a property dispute.
If You Cannot Agree Later: Partition
If the relationship deteriorates or one party wants out and the other refuses to sell, either owner can file a partition action asking the court to divide the property or order it sold. For a single-family home, physical division is almost never workable, so the court orders a sale.
Partition is slow and expensive. Straightforward cases typically run six to twelve months. Attorney fees can exceed $5,000 on a simple case and climb past $15,000 to $20,000 when contested. Court-ordered auctions often fetch less than market value; in many states the minimum auction price cannot fall below two-thirds of the appraised value, still a painful discount. The court can also adjust the split of proceeds based on which owner paid more toward the mortgage, taxes, and maintenance over the years. A well-drafted co-ownership agreement with a buyout clause and a mediation requirement is what keeps partition a last resort instead of a first one.