Lending money to family...

[Apple Of Sodom]

Bring up the fact that they shouldn't be buying a house without some solid savings. Tell them to hold off a year or get a smaller place for now. What does your SO think of all this?

My wife (it is her sister asking, and those two are very close) wants to help in some way. She pointed out we had help when we were young. My parents helped us buy an income property (9-plex) that wasn't much more expensive than the house my in-laws are looking at. The down payment came mostly from them, although we equally shared in the risk and sweat equity and major headache of managing apartments. As part of the agreement, my wife and I did pay rent while we lived there. When we sold, my parents got their initial down payment back and we split the leftover proceeds. I am very grateful that they did that and hope to do the same for my kids one day. It taught me a hell of a lot about money, management and responsibility.

 

[Golgatha]

I honestly think they rationalized it in their own minds. They are viewing it as selling me a car then buying it back, which may be fraudulent as someone pointed out.

I hope that is what it is at least. I know they are in love with this house, etc etc. I think they are too emotionally invested in it and can't see the objectivity of it and are far too optimistic about their future, meaning they think CS payments will decrease and income will increase.

Typically CS payments will only increase right along with the income of the supporter.

I think you should tell her very frankly why you're not willing to give them the money, and reinforce that it's overall because you DO treasure your relationship with her, and because you're worried about her future. I would also only tell her and leave her fiance out of the discussion. Also, tell her he can discuss it with you personally if he becomes upset.

 

[Apple Of Sodom]

I was just reading online that it if I give them a down payment and it isn't a gift (i.e. they are required to pay it back) then we have both committed mortgage fraud. They could be required to pay the mortgage in full, pay 6-figure fines, and spend time in jail.

Well, that certainly makes it easier for me!

 

[rsd]

I believe this is correct. I know when I recently bought a home we had to prove extensively and trace all deposits into our accounts, multiple times. I know you can grant people a gift (I forget what the $ limit is), but if you don't do it that way then what you said is likely the case.

 

[SunnyD]

I wouldnt do the first. if they had no problems asking you for 16k, what makes you think that when they dont have money they wont ask you for mortgage help/delay/etc.. what if they have a kid? you gonna be 10x worse feelings if you have to evict them.. or can you bring yourself to do that? besides, they want the 280k house, not a "reasonable" one for their income.

I won't argue any of those points simply because they're all valid.

I'm just saying this would be the most reasonable answer (in my mind) for someone that would absolutely feel obligated to help in some way. If it were me, I'd rather have a rental property for my troubles (and pissed off family) than simply be out a boatload of money. Again... assuming that I felt obligated to help in any way.

 

[Stuxnet]

Wow. I'd be pissed at them just for putting you in this situation in the first place. Hellz noz.

 

[Fenixgoon]

Only $16k in a 401k when the husband is age 31 is a bit worrying too. Either his salary is low enough they can't afford a $280k house, or he's a poorly managing his finances; quite likely it's both.

jesus i have 11k in my 401k after 1 year @ 25.

 

[LurkerPrime]

jesus i have 11k in my 401k after 1 year @ 25.

And I bet you wont be asking your brother or parents for a downpayment for a house.

To the OP. This is a bad situation to be in altogether. If you can't flat out tell them no, then make up something about not having the money available. Also 3% FHA loans should be available, in that case they only need an extra 4.4k. They seem to show all the red flags of not being financially savy with thier money. You should not enable them. It can only end badly.

 

[Golgatha]

I was just reading online that it if I give them a down payment and it isn't a gift (i.e. they are required to pay it back) then we have both committed mortgage fraud. They could be required to pay the mortgage in full, pay 6-figure fines, and spend time in jail.

Well, that certainly makes it easier for me!

Easy out. Take it.

 

[DaWhim]

you didn't mention how their finances are. do they make enough? are they generally stupid with their money?

one thing i know is i don't solicit financial advice. people will do what they want until the sh1t hits the fan, you just can't talk people out of it. if you can afford to gift 28k, then you got a lot of people.

1 of my sisters saved a bit of money for a year or two, then bought a house with 3-4% downpayment with a FHA loan. i am sure she can manage the payment. no need to borrow fromt he family.

 

[Apple Of Sodom]

you didn't mention how their finances are. do they make enough? are they generally stupid with their money?

one thing i know is i don't solicit financial advice. people will do what they want until the sh1t hits the fan, you just can't talk people out of it. if you can afford to gift 28k, then you got a lot of people.

1 of my sisters saved a bit of money for a year or two, then bought a house with 3-4% downpayment with a FHA loan. i am sure she can manage the payment. no need to borrow fromt he family.

They are good, hard-working people. He sold his nice truck to get a Focus to save money. They have been paying down his student loans, etc. I would say they are slightly above average with money and are willing to sacrifice. But I have first hand knowledge that people get stupid when it comes to money. I lost a best friend of ten years over $40K (long story short, he was sick, we raised $80K for him, when he started spending it on motorcycles and shit we took the remaining $40K and put it into transplantfund.org for him.) I never would have thought he would do such dumb things.

I think a second mortgage for the 20% down would be good...but I think their credit rating is only fair.

 

[ichy]

Then tell her you wish you could, but you simply don't have the cash available to help them out. Full stop, end of discussion.

This. I hope the OP has noticed that not a single person on this thread said that loaning them money is a good idea.

 

[ichy]

If they're willing to sacrifice then they should live in a cheap apartment while they save money for a down payment. There's no law that says married people have to own a house.

 

[unokitty]

OP,

Through no fault of your own, you are in a difficult position.

My experience is that, with few exceptions, family loans are very risky and often turn out bad.

Please go ahead and give them as much as you think prudent.

For your situation, there may not be a "right" course of action. But there are less risky course of action.

Best of luck,
Uno

 

[Apple Of Sodom]

This. I hope the OP has noticed that not a single person on this thread said that loaning them money is a good idea.

Sure did. I'm simply not going to do it, citing mortgage fraud. It might be a pussy indirect way out but it will save the relationship.

 

[OutHouse]

Don't do it.

It will end badly.

No family with only $4k should be looking at buying a $280k home.

bolded for truth

 

[OutHouse]

jesus i have 11k in my 401k after 1 year @ 25.

how much liquid cash do you have?

 

[Mixolydian]

Run away now. Not being able to afford a house is their problem, not yours.

 

[BurnItDwn]

Sounds like they should be maybe looking at a 150-200k house at most ... They may be able to get 0 down in that price range assuming good credit...

 

[OutHouse]

My wife (it is her sister asking, and those two are very close) wants to help in some way. She pointed out we had help when we were young. My parents helped us buy an income property (9-plex) that wasn't much more expensive than the house my in-laws are looking at. The down payment came mostly from them, although we equally shared in the risk and sweat equity and major headache of managing apartments. As part of the agreement, my wife and I did pay rent while we lived there. When we sold, my parents got their initial down payment back and we split the leftover proceeds. I am very grateful that they did that and hope to do the same for my kids one day. It taught me a hell of a lot about money, management and responsibility.

wow must be nice to have rich parents.

oh and a 9-plex apartment building for 20K must be really ghetto.

 

[OutHouse]

Only $16k in a 401k when the husband is age 31

when i was 31 i had 0.00 in my 401K.

the air force did not offer one and my first employer did not offer one either.

 

[Apple Of Sodom]

wow must be nice to have rich parents.

oh and a 9-plex apartment building for 20K must be really ghetto.

Your tone makes you sound like a jealous asshole.

Reading fail. The 9-plex wasn't much more than the $280K house my in-laws are looking at.
The 9-plex was in ok condition but needed work. It is called sweat equity. We provided a lot of the sweat. I think we bought it for $30-something per square foot.
My parents aren't rich. They were/are middle class. They provided much of the down payment. We couldn't have done it without them.

I suppose if my in-laws were looking at investment property and I was going to be 50% owner then I could "lend" the down payment.

 

[sixone]

Sure did. I'm simply not going to do it, citing mortgage fraud. It might be a pussy indirect way out but it will save the relationship.

You need to discuss this further with your wife. While I applaud her wish to be of assistance to her little sister, her first obligation is to YOU.

She benefited from your parents' wish to help you. She is not her sister's parent, and should not be stepping into that role.

The best compromise would be a gift large enough to satisfy your wife's desire to help out, but not so large that it puts your family on shaky ground. Is that possible?

 

[Apple Of Sodom]

You need to discuss this further with your wife. While I applaud her wish to be of assistance to her little sister, her first obligation is to YOU.

She benefited from your parents' wish to help you. She is not her sister's parent, and should not be stepping into that role.

The best compromise would be a gift large enough to satisfy your wife's desire to help out, but not so large that it puts your family on shaky ground. Is that possible?

That is possible...although I am against giving money as a gift in principle unless it is for something life saving/life changing, as in to help someone out who is in need, not because they want something nice that they cannot afford.

I will suggest they find investment property.

 

[Krazy4Real]

Bad idea. Don't do it.