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Lending money to family...

A

Apple Of Sodom

Golden Member
My wife's sister (who I am close to) and her fiance are getting married this summer. She is 21, he is 33 or so. They are good people and we are close to them... and for some reason they asked me for a down payment on a house. They are looking at a $280K house and only have about $4K of the required $20K down. Their brilliant idea is to sell me her car (I would either take a loan or use cash) and give them the money. She would continue to use the car. After the house closes they would finance the car and buy it back or make payments to me.

I want to help them, and if they were just a few thousand short of down payment might even give it to them as a wedding gift. Am I wrong in thinking that they are going to be house poor and they should buy a house if they can't even afford 1/4 of the down payment? I think I should talk them out of buying an expensive house altogether.
 
Run. Away. Now.

Don't walk.

Run.

edit: Consider anything you give them a gift, if you can afford to lose the money go for it. If you get repaid, bonus.
 
Apple Of Sodom said:
My wife's sister (who I am close to) and her fiance are getting married this summer. She is 21, he is 33 or so. They are good people and we are close to them... and for some reason they asked me for a down payment on a house. They are looking at a $280K house and only have about $4K of the required $20K down. Their brilliant idea is to sell me her car (I would either take a loan or use cash) and give them the money. She would continue to use the car. After the house closes they would finance the car and buy it back or make payments to me.

I want to help them, and if they were just a few thousand short of down payment might even give it to them as a wedding gift. Am I wrong in thinking that they are going to be house poor and they should buy a house if they can't even afford 1/4 of the down payment? I think I should talk them out of buying an expensive house altogether.
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If they are struggling on a down payment, then they're not ready for a house. Once they get a house, they will be hit by multiple costs: utilities, repairs, tax, etc, etc, etc. They might not be able to meet the payments for your loan. If you're going to do it, consider your money a gift.
 
Don't do it.

It will end badly.

No family with only $4k should be looking at buying a $280k home.
 
SpatiallyAware said:
ONLY as a gift. Otherwise be prepared for this to come between you and your sister.
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I've known her since she was 12 and we are very close. I feel like either way I go damage will be done. Why the fuck do people need to ask others for money? I guess my question is, how do I go about letting them down?

She has never once asked me for money and knows how I feel about it. I'm thinking this is her fiance. The bitch of it is, they know my wife and I are backing a new business venture and currently have a lot of cash tied up.

Does the bank look for these types of things when lending? Aren't they going to pull a bank statement and see that their account went from $4K to $20K overnight and wonder how that happened?
 
Give the loan, but inside your head you have to accept the money lost. If you cannot do this, don't do it.
 
Apple Of Sodom said:
I've known her since she was 12 and we are very close. I feel like either way I go damage will be done. Why the fuck do people need to ask others for money? I guess my question is, how do I go about letting them down?

She has never once asked me for money and knows how I feel about it. I'm thinking this is her fiance. The bitch of it is, they know my wife and I are backing a new business venture and currently have a lot of cash tied up.

Does the bank look for these types of things when lending? Aren't they going to pull a bank statement and see that their account went from $4K to $20K overnight and wonder how that happened?
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There's your answer. Tell them your money is tied up in an investment and say, "Are you mad, bro?"
 
Don't. I have had similar experience, although not as much as yours...it has alot of grief involved.

If your'e willing to give, make is a gift.
 
no. they should live in a crappy apartment or trailer like we all did when we first got married
 
i'm not sure if trying to talk to them is really going to do anything. if they're considering a 280k house and only have a 4k saved for a downpayment, logic regarding the purchasing of the home, mortgage payment, and house poor arnt really going to make sense.

the whole selling you the car and them keeping it and paying you back or financing really doesnt make sense. you take all of the risk. if you're going to do it, either give it freely and dont expect anything to come back or go the whole 9 yards and write up a loan contract.

what's to stop them from financing the car now and using the money for downpayment? it doenst change anything except that loan is now part of their mortgage financing for monthly debits. with you it would have been hidden but if they cant qualify with it above books, you think you'll get paid back when it's below?
 
alent1234 said:
my inlaws borrowed part of the down payment and paid it back

don't they have 401k's?
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They have a combined total of $16K in 401k... they could borrow up to 50% of that, but they would still need $8K in cash.

Part of the problem is that she is young and he is in his 30s with a kid. He is only a few years older than me and I think they look at me and think that they should be where I'm at... In my opinion, 21 and married should be looking for a small starter home or condo, not a nearly $300K house.

Part of the other issue is that a lot of their family is out of state and can barely afford tickets to the wedding, let alone a place to stay. They want to close on a home before this summer so people have a place to stay.

I love them both, and I hate to say it...they are part of what is wrong with America. Not to mention this is his second marriage, so they are statistically more likely to divorce than they are to stay together.
 
For tax reasons this should be given as a gift. I think the limit is 13k per person per year. So if you were going to do it, give 10k to each person. However via this route you wouldn't have any paperwork to protect you if they didn't pay you back.

The bank will want account records from them, and they will question large deposits, especially ones made via family members. Gift paperwork puts them at ease.

With all that being said. I would NOT lend any of my family members 20k (well maybe one of my brothers and parents).
 
Apple Of Sodom said:
My wife's sister (who I am close to) and her fiance are getting married this summer. She is 21, he is 33 or so. They are good people and we are close to them... and for some reason they asked me for a down payment on a house. They are looking at a $280K house and only have about $4K of the required $20K down. Their brilliant idea is to sell me her car (I would either take a loan or use cash) and give them the money. She would continue to use the car. After the house closes they would finance the car and buy it back or make payments to me.

I want to help them, and if they were just a few thousand short of down payment might even give it to them as a wedding gift. Am I wrong in thinking that they are going to be house poor and they should buy a house if they can't even afford 1/4 of the down payment? I think I should talk them out of buying an expensive house altogether.
Click to expand...

This ... they sound like they don't have the finances for it right now.
 
Apple Of Sodom said:
I've known her since she was 12 and we are very close. I feel like either way I go damage will be done. Why the fuck do people need to ask others for money? I guess my question is, how do I go about letting them down?

She has never once asked me for money and knows how I feel about it. I'm thinking this is her fiance. The bitch of it is, they know my wife and I are backing a new business venture and currently have a lot of cash tied up.

Does the bank look for these types of things when lending? Aren't they going to pull a bank statement and see that their account went from $4K to $20K overnight and wonder how that happened?
Click to expand...
See, just say you don't have it. If the banks won't give them the money, why should you?

Apple Of Sodom said:
They have a combined total of $16K in 401k... they could borrow up to 50% of that, but they would still need $8K in cash.

Part of the problem is that she is young and he is in his 30s with a kid. He is only a few years older than me and I think they look at me and think that they should be where I'm at... In my opinion, 21 and married should be looking for a small starter home or condo, not a nearly $300K house.

Part of the other issue is that a lot of their family is out of state and can barely afford tickets to the wedding, let alone a place to stay. They want to close on a home before this summer so people have a place to stay.

I love them both, and I hate to say it...they are part of what is wrong with America. Not to mention this is his second marriage, so they are statistically more likely to divorce than they are to stay together.
Click to expand...
That's pitiful.. They need to live within their means... How are they even paying for a wedding? Maybe they should forgo that and have more for a down payment if they really want to buy. Apparently the guy has already had a wedding anyway..
 
Everything that's been said, if you give it don't expect it back.

But more prominently if they can't even make up the down payment they have no business buying a house yet.
 
$0 down loans still exist.

If that isn't an option, how about them buying a house they can AFFORD.

If that isn't an option, then they should be renting until they CAN AFFORD a house.

If you absolutely feel the need to help them financially, never ever EXPECT to see that money returned.

Long and short of it: If they can't pony up to be able to buy a house on their own, they really shouldn't be buying a house (yet).
 
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