Pay it Forward Culture Paints Family Gift Funds in a New Light

Rugged individualism is a hallmark of American culture that has driven innovation and discovery through its history. But there are times when the self-made mindset is more of a barrier than an asset.

For 23-year-old Josh and his girlfriend Mondy, accepting gift funds to help with their down payment from Mondy’s family not only helped them achieve homeownership, but opened their mind to a culture of paying it forward.

Although at odds with the entrenched sentiments of individualism and masculinity, the notion of accepting assistance with the understanding it will be passed on put Josh and Mondy, who have been together since before college, years ahead of their peers in creating wealth through home equity.

The young couple was happy to share their homebuying story in hopes that it will give a new perspective on accepting gift funds from family. Out of respect for their privacy, they’ve asked us not to share their last names.

“Renting is not the best idea ever”

Even before homeownership, Josh has long been ahead of the curve. At 16, he started a business designing racing drones and he currently runs two businesses in addition to his role as Lead Architect at Apex Pathways.

Mondy and Josh both graduated from California Polytechnic State University right as the COVID-19 took hold in the United States. Instead of staying in California or pursuing careers elsewhere, the couple returned home to Washington State during lockdown where Mondy landed a Systems Engineer role at Boeing.

When it came to housing, neither were crazy about renting. Mondy wanted a place to call their own and they both agreed renting wasn’t wise financially.

“Apartments we were looking to rent in that area were at least in the high three thousands if not low four thousands per month,” Josh said. “The idea to me of renting is not the best idea ever -- feels like you’re giving money away with nothing in return.”

With mortgage payments lower than rent payments in their area, the decision to buy was easy. But a blazing hot Seattle metro housing market and a sufficient down payment stood in their way.

“Between the both of us, we had enough to make the down payment, but it would have been most of our savings,” Josh said. “So it was then about whether we could afford furniture and keeping money in investments.”

Pay it forward mentality

In addition to investments, savings, and promising careers, Mondy’s parents insisted on providing gift funds for down payment assistance to help the young couple buy a home.

Josh said his initial reaction was to refuse.

“I had some feelings that it wouldn’t fully be our home unless we bought it completely ourselves,” he said. “I didn’t want that feeling that someone else owned a portion of it.”

But instead of digging in, Josh and Mondy discussed it with her parents, and discovered why they were so adamant about contributing to their down payment.

“Mondy’s parents emigrated from Iran when they were young because their parents wanted them to have a new and better life in America,” Josh said. “So her grandparents financially assisted her parents on their down payment, and it was expected that her parents would do the same when the time came.

Josh said after hearing their story and taking some time to think about it, he and Mondy overcame their initial reluctance... mostly.

“Naturally, we still felt a little guilty taking it and we kept saying that to them, and they started getting a little annoyed,” Josh said. “Finally, they just flat out said ‘This is your inheritance — you’re going to get it anyway.’”

Related: Family Is Key to the Hispanic Homeownership Surge

A welcome boost

While Josh and Mondy were still providing a majority of the down payment, the assistance from Mondy’s parents proved valuable in the hyper-competitive housing market. From February to March 2021 -- during the heart of their home search -- the median sale price in the Seattle metro area jumped from $655,000 to $700,000.

The assistance allowed them to set a top-line budget of $900,000 while keeping monthly mortgage payments at a manageable level. It also put the young, unmarried couple in a better position to get preapproved for a home loan, which is crucial in competitive markets.

“Based on our age and depth of our credit the mortgager was looking for some safety assurances,” Josh said. “That larger down payment helped us secure a loan and a better insurance rate.”

Their search spanned two months, 30-40 houses, and a handful of bidding wars. Houses listed in their price range would end up selling for hundreds of thousands over list price after only a few days on the market.

“Our biggest issue is that there wasn’t really any time to think,” Josh said. “They were put on the market, you had a short window to view the home, then a short window to decide if you want to spend a good portion of your life in it.”

After coming up short in several bidding wars, the couple slowed their search and considered putting it on hold. Soon they stumbled across a listing that had passed its offer review date and hadn’t accepted any offers. They toured the house that night, contacted the seller, and put in an offer that expired the following morning.

“We took an ultra-aggressive approach to it because we felt like we had nothing to lose,” Josh said. “And it worked out. It kind of made [the seller] all panicked and put some pressure on the listing side. Honestly, it felt pretty good to turn the tables.”

Their strategy paid off, and the couple landed the house. Since it was under their top-line budget, they were able to make a 25% down payment and keep their mortgage payments relatively low, which was a top priority.

“A brutal barrier of entry”

While Josh and Mondy put themselves in a great position to become homeowners at a young age, down payment assistance from family proved valuable for getting a loan, making a competitive offer, and minimizing their mortgage payments.

But not everyone can count on family for gift funds or is willing to accept the help.

For those that do have family willing to offer financial assistance, Josh had two pieces of advice.

Figure out why they want to help you

“We learned a lot about Persian culture and the idea of paying it forward during the homebuying process. And it totally made sense that Mondy’s parents wanted to pass down their inheritance while they were alive so they could see us benefit from it.”

Know the situation you are getting into

“In our position, we were very close to [Mondy’s parents] and we knew they were doing this out of love and truly wanted nothing in return. I know they won’t turn around in 10 years and say ‘Hey, about that money we let you borrow…’”

With a little help clearing the down payment hurdle, Josh and Mondy are not only paying less per month for housing -- they are building home equity during a time of record home appreciation.

The early jump into homeownership not only benefits their financial well-being, but will continue to shape future generations.

“Paying it forward is one of those things that takes one person to kickstart,” Josh said. “After realizing how much I wanted to be a homeowner, it’s something I would want to help my future kids to achieve.”