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Leaning on loved one for down payment becomes new normal in red-hot housing market.

LAKE STEVENS, Wash. — Home buying is becoming a family affair.

Young, first-time buyers are hitting up family members to help with down payments in our increasingly expensive and competitive housing market.

Nationally, most renters want to own. Sixty-six percent say they believe owning is necessary to live the American dream, according to Seattle-based Zillow.

The number one barrier is coming up with a down payment, cited by 68 percent of renters nationwide.

With an increasingly expensive housing market here in Western Washington, more and more buyers are turning to family members to make it happen.

For Krista and Mickey Lilly, a rent hike and the birth of their first child, Emma, provided the motivation to break into the housing market.

“We were looking at price ranges all over," Krista said.

Mickey agreed.

"You were up here. I was down here,” he said, referring to their differing interests in houses and the costs.

They both work in King County and started looking there.  After realizing the average home price was $676,000, they started searching for homes in Snohomish County, which averages $450,000 per home.

Inventory for homes on the market is still tight, meaning competition between buyers is heavy.

“Say you look at a house on Saturday - by Monday, it’s like sale pending,” Mickey said.

Looking for insight and an edge, they turned to Michael Dormer, Sr. Mortgage Analyst at Northpointe Bank.  He says in this market, he's also part housing psychologist.

“Setting their expectations where they don’t get disappointed," Dormer says. "So they don’t get dismayed as much as they otherwise would.”

He says to be competitive, buyers better come with cash.

According to the National Association of Renters, 25 percent of young buyers used a gift from a relative for a down payment on a home in 2017. Dormer says in highly competitive Western Washington, it's more like 50 percent.

“It’s very, very common for me to have a conversation with borrowers and the subject comes up," Dormer said. "'How about we talk to the parents? Or we tap some other resources to see if we can come up with the down payment?' More often than not, it ends up being the edge.”

Krista and Mickey put together a home purchase plan and approached a relative.

“I think she said, 'Just cut to the chase and ask how much do you want? How much do you need?'" Mickey said.

The relative gave the couple the gift.  They closed and moved into to their new home in Lake Stevens.

Mickey is overflowing with pride.

“Pride of ownership," he says. "That’s awesome, like, I have a house. I have a garage I can park in. I have a house ... and we got lucky, that we have loving family.”

Are you wondering when they’ll pay the relative back?

As far as the lender is concerned, they can’t.

There are a few things you should know are required by lenders if you want to help a relative with a down payment:

  1. The money must be a true gift, not a loan disguised as a gift.
  2. You must provide a gift letter, saying the borrower is not expected to pay back the gift and the donor has no interest in the sale of the property. You can download the letter online.
  3. The lender will require a paper trail, showing the transfer of money.

A few things to know, as home buying in the Pacific Northwest becomes a family affair.