Buying a house for someone else is legal, and there are three practical ways to do it: pay cash, apply for the mortgage together as a non-occupant co-borrower, or co-sign a loan in the other person’s name. The route you pick decides whether your name goes on the deed, how much you have to put down, what the lender charges in interest, and what you owe the IRS afterward. It also decides how much legal protection the person actually living in the home ends up with.
The Three Ways to Do It
Pay Cash
A cash purchase skips the lender entirely. No underwriting, no monthly payment, no occupancy rules to worry about. After closing you can keep the title in your name or transfer it to the occupant by recording a new deed with the county. If you transfer, a warranty deed gives the recipient a legal claim against you if a hidden lien or title defect turns up later, and it preserves existing title insurance. A quitclaim deed transfers only whatever interest you have, with no promises, and can void the title insurance on the property.
Apply as a Non-Occupant Co-Borrower
Here you and the future occupant both sign the mortgage. Your income, debts, and credit help qualify the loan, and both names go on the note and the deed.1Fannie Mae. Non-Occupant Borrowers Because the occupant is also a borrower and will live in the home, lenders generally treat the property as a primary residence, which means a smaller down payment and a lower interest rate than an investment loan would carry.
Co-Sign the Loan
Co-signing guarantees someone else’s mortgage without necessarily putting you on the deed. You are on the hook for the full debt, including late fees and collection costs, if the primary borrower stops paying.2Federal Trade Commission (FTC). Cosigning a Loan FAQs It can get a thin-credit borrower approved, but you carry the risk without the ownership rights.
How the Lender Classifies the Property
Occupancy drives everything. If the person living in the home is on the mortgage, the loan is a primary residence loan even when a non-occupant co-borrower is attached.3Fannie Mae. Occupancy Types If you are the only borrower and you will not live there, the lender classifies it as a second home or investment property and tightens the terms accordingly.
Do not lie about who will live there. Telling a lender the property is your primary residence when you actually intend for someone else to live there, with only your name on the loan, is mortgage fraud under federal law. A conviction can carry a fine of up to $1,000,000, a prison sentence of up to 30 years, or both.4Office of the Law Revision Counsel. 18 USC 1014 – Loan and Credit Applications Generally Short of criminal charges, a lender that catches the misrepresentation can call the entire loan due and start foreclosure.
What You Will Need to Put Down and Qualify
With the Occupant on the Loan
When the occupant co-borrows with you, Fannie Mae allows a loan-to-value ratio up to 95 percent through automated underwriting and 90 percent for manually underwritten loans.1Fannie Mae. Non-Occupant Borrowers That is 5 to 10 percent down. Manually underwritten loans generally require a credit score of at least 720 once the loan-to-value ratio passes 75 percent.5Fannie Mae. Eligibility Matrix
FHA loans are another route. FHA generally requires a non-occupant co-borrower to be a family member, and it defines family broadly: parents, children, stepchildren, grandparents, siblings, in-laws, and domestic partners are all included.6HUD. What Are the Guidelines for Co-Borrowers and Co-Signers FHA also lets the entire down payment come from gift funds, useful when the occupant has little saved.
With Only You on the Loan
If you are the sole borrower and will not live there, expect an investment-property loan. Fannie Mae caps the loan-to-value ratio at 85 percent on a single-unit property and 75 percent on multi-unit properties, so plan on 15 to 25 percent down.5Fannie Mae. Eligibility Matrix Rates run higher too.
Debt-to-Income
The lender adds the new mortgage payment to your existing debts. For Fannie Mae conventional loans, the manually underwritten cap is 36 percent, with borrowers who have stronger credit and reserves qualifying up to 45 percent. Loans run through the automated system can go as high as 50 percent.7Fannie Mae. B3-6-02 Debt-to-Income Ratios If you already carry a mortgage on your own home, the payment on the second one stacks on top for qualification purposes.
If any part of the down payment is a gift rather than a loan, the lender will want a signed gift letter identifying the donor, the relationship, the amount, and a statement that the money does not have to be paid back. Lenders and the IRS both use it to confirm the money is not undisclosed debt.
Whose Name Goes on the Deed
Title decisions are separate from loan decisions. You can hold the property three main ways.
Joint tenancy with right of survivorship. You and the occupant hold equal shares, and when one owner dies, the other automatically takes the whole property without probate.
Tenancy in common. Ownership can be split unevenly, say 70/30, and each owner can sell or bequeath their share independently. There is no automatic survivorship; a deceased owner’s share passes through their will.
Sole ownership. Only your name is on the deed. The occupant has no property rights and typically lives there under a separate written agreement.
Gift Tax and Form 709
Whether you transfer the deed, cover the down payment, or make the mortgage payments, you are making a gift for federal tax purposes. For 2026, the annual gift tax exclusion is $19,000 per recipient.8Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Anything above that in a calendar year to one person requires you to file IRS Form 709, the federal gift tax return.9Internal Revenue Service. Instructions for Form 709
Filing does not usually mean paying. The excess simply reduces your lifetime gift and estate tax exemption, which for 2026 is $15,000,000.10Internal Revenue Service. Whats New – Estate and Gift Tax Married couples who elect to split gifts can double the annual exclusion to $38,000 per recipient, but both spouses must file Form 709 to make that election. Most people who help a family member buy a home will owe no gift tax; the filing itself is still required and easy to miss.
The Tax Bill Down the Road
Cost Basis Follows the Gift
When you gift a home, the recipient takes your original cost basis, adjusted for improvements and other factors.11Internal Revenue Service. Property Basis, Sale of Home, Etc. If you paid $200,000 and the home is worth $400,000 when you hand it over, the recipient’s basis is $200,000. When they sell, capital gains tax runs from that number, not the value on the day of the gift. Inherited property works differently: it gets a stepped-up basis equal to fair market value at the owner’s death.
Mortgage Interest Deduction
If you are on the mortgage and you itemize, you may deduct the interest. For homes bought after December 15, 2017, the deduction covers the first $750,000 of mortgage debt ($375,000 if married filing separately). Homes bought earlier use a $1,000,000 cap ($500,000 if married filing separately).12Internal Revenue Service. Real Estate Taxes, Mortgage Interest, Points, Other Property Expenses To claim it you have to be legally obligated on the mortgage, which is why a co-signer who is not on the deed can run into trouble here.
Below-Market Rent Kills Rental Deductions
If you own a home and let a family member live there rent-free or at below-market rent, the IRS treats those days as personal use, not rental use.13Internal Revenue Service. Topic No. 415 – Renting Residential and Vacation Property Practically, that means you cannot deduct repairs, depreciation, or property management costs against rental income. Charging your child $500 a month for a home that would rent for $2,000 on the open market gets you personal-use treatment; only mortgage interest and property taxes typically survive as deductions.
Insurance When You Own but Don’t Live There
A standard homeowners policy is written for owner-occupants. If you own a home and someone else lives in it, most insurers will not cover it under a regular homeowners policy, even for a family member. You will typically need a landlord or dwelling policy, which insures the structure and provides liability coverage for injuries on the property. Many insurers treat anyone in the home for roughly 30 days or more as a tenant, whether or not they pay rent. The occupant should carry their own renters insurance for personal belongings and personal liability.
Transferring the Property Later
If you buy with a mortgage and later want to sign the deed over to the person living there, watch for the due-on-sale clause. Almost every mortgage has one, and it lets the lender call the loan balance due when the property changes hands.
Federal law blocks that in some situations. Under the Garn-St Germain Act, a lender cannot enforce a due-on-sale clause when the property is transferred to the borrower’s spouse or children, in a divorce, at the borrower’s death, or into a living trust in which the borrower remains a beneficiary.14Office of the Law Revision Counsel. 12 US Code 1701j-3 – Preemption of Due-on-Sale Prohibitions Transfers to siblings, parents, or more distant relatives are not on the protected list, so the lender could call the loan. If the eventual owner is outside the protected categories, paying cash upfront or having them refinance into their own mortgage sidesteps the problem.