If we're going to borrow money from our parents for a down payment . . .

[Anonymous]

OP here. I really wasn't try to cheat on anything. I didn't know that this was wrong and would have even told our mortgage broker, realtor, etc. about our plans - not trying to hide anything. I'm sure they would have let us know that this isn't an option. As I said in my original post for those who missed it, we've already saved $70,000 (on top of our 3 month emergency fund and automatic contributions to 2 retirement funds and a college saving plan for our son) and we put $1200 a month in our house fund right now. We're only looking at buying a $350,000-380,000 home so actually we really do have enough money for that. Before this thread I was actually kind of proud of saving that much on a take home salary of about $6000 a month.

I actually do appreciate knowing how wrong I was about being able to borrow money from the parents. Thanks for the insight, but not for the vitriol.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It might be a little bit fraudy. but lots of people do it, and if you are careful, e.g. use cash where appropriate, I cannot imagine you would ever be caught.

I don't think the law looks at fraud as a little bit. Fraud is fraud.

what the law doesn't know about the law doesn't care about. And if you don't think there are gradations of right and wrong, legal and illegal, then you have a pretty strange Manichean view of the world.

[Anonymous]

Anonymous wrote:OP here. I really wasn't try to cheat on anything. I didn't know that this was wrong and would have even told our mortgage broker, realtor, etc. about our plans - not trying to hide anything. I'm sure they would have let us know that this isn't an option. As I said in my original post for those who missed it, we've already saved $70,000 (on top of our 3 month emergency fund and automatic contributions to 2 retirement funds and a college saving plan for our son) and we put $1200 a month in our house fund right now. We're only looking at buying a $350,000-380,000 home so actually we really do have enough money for that. Before this thread I was actually kind of proud of saving that much on a take home salary of about $6000 a month.

I actually do appreciate knowing how wrong I was about being able to borrow money from the parents. Thanks for the insight, but not for the vitriol.

Well OP, I've been on plenty of DCUM threads where people get pissy if your parents paid for college, paid for your wedding, or even helped out (non financially) with your newborn. Self-sufficiency is something certain posters get very bitter about so I'm not surprised the turn this thread took.

It sounds like you have plenty of money for a down payment without needing a significant chunk of money from your parents. Talk it over with your realtor since you have some options, he or she may be able to advise you on the best plan. It's obvious to me you aren't trying to cheat, it sounds like you are just trying to make a sound financial decision - since borrowing from your parents with their interest rate sounds cheaper than borrowing from a bank.

[Anonymous]

This is not fraud, it's called good tax planning. Your parents did not record a lien on your property and there are no other legal documents. Whatever understanding you have between your parents is up to you all. You can "gift" back the money to your parents as you are able to make the payments and they do not pay taxes on that money as long as it's under $13,000/yr (per spouse) so you and your husband could gift back $26,000/year (actually $52,000 b/cs you could gift 13 to mom, 13 to dad, and your husband could do the same). At any rate, none of this is taxable.

Another option to consider if you don't need the $$ for down payment but perhaps to help w/ living expenses after you close on the property is to have your parents loan you the money after closing. They would record a lien on the property and you would have legal docs between you and your parents. You could do a favorable interest rate (say 5%). How this would work: Your parents would borrow $20K from their HELOC and lend to you. You would have the paperwork drawn up by any real estate attorney, a lien would be recorded, and you would pay them about $100/month ($20K X 5%). You would get a tax deduction for your payments to your parents, and they would declare on their taxes the interest income that you are paying them.

These types of transactions are done all the time between families that have money. Everyone wins and it's all above board as long as the lien is recorded, parents declare the income, and the interest rate is market rate (5% is market rate).

Hope this helps.

[Anonymous]

My husband and I did this a few years back. We only had half our down payment. My parents gave us the rest, called it a gift, and borrowed the equity on their house. We paid the monthly bill for the equity loan and eventually paid it off in a lump sum. No one ever questioned the "gift" they simply called it a "gift" and we provided documents to the mortgage company showing it was a gift. I guess we committed fraud.....we have since sold the house and moved on....

[Anonymous]

Agree with you posters. The bank will ask in the papers. They should grow up and save their money and buy a house like real adults. This is why we have a foreclosure problem in the US because of losers like this buying houses they cannot afford. If you can't save a downpayment, you cannot afford a house.

don't think this was fair. Mortgage broker told us that a big percentage of home buyers are helped by their parents. It doesn't have to mean they are doing something inadvisable.

[Anonymous]

My parents just gave us money for a down payment and we didn't get the money into our account until about a month before closing. We just needed to provide copies of the cancelled checks and fill out a gift letter. Some lenders, I think, ask you to show the money in our account before things get started but ours just took our word for it that we had the down payment and asked us to show the paper trail later. We were asked to provide 2 months worth of statements, etc intitially for the app. When things moved into processing we were asked to provide a second round of paperwork but this time only going back a month.

The gift letter did state that we weren't paying my parents back. If its a loan and you have to pay the money back, the mortgage broker will likely need to include that as 'debt' when looking at your debt to income ratio and it might affect the amount you are qualified for.

[Anonymous]

Anonymous wrote:

Agree with you posters. The bank will ask in the papers. They should grow up and save their money and buy a house like real adults. This is why we have a foreclosure problem in the US because of losers like this buying houses they cannot afford. If you can't save a downpayment, you cannot afford a house.

don't think this was fair. Mortgage broker told us that a big percentage of home buyers are helped by their parents. It doesn't have to mean they are doing something inadvisable.

We have the largest housing bubble in US history. Our financial system is on the brink of collaspe. Your mortgage broker doesn't care if people do this because he repackages the mortgage and sells it off. I don't care "if everyone does it!" Sound financial reason dictates that people save their money for a downpayment to buy a house. If you cannot afford to save a downpayment then you have no business buying a house. I realize my opinion is unpopular but it is financially sound. Rules are there for a reason and just because a large percentage of the population chooses to break them, doesn't make them "go away". God, our soceity is so greedy and into immediate gratification. I am almost looking forward to the coming depression so these attitudes will go away.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Agree with you posters. The bank will ask in the papers. They should grow up and save their money and buy a house like real adults. This is why we have a foreclosure problem in the US because of losers like this buying houses they cannot afford. If you can't save a downpayment, you cannot afford a house.

don't think this was fair. Mortgage broker told us that a big percentage of home buyers are helped by their parents. It doesn't have to mean they are doing something inadvisable.

We have the largest housing bubble in US history. Our financial system is on the brink of collaspe. Your mortgage broker doesn't care if people do this because he repackages the mortgage and sells it off. I don't care "if everyone does it!" Sound financial reason dictates that people save their money for a downpayment to buy a house. If you cannot afford to save a downpayment then you have no business buying a house. I realize my opinion is unpopular but it is financially sound. Rules are there for a reason and just because a large percentage of the population chooses to break them, doesn't make them "go away". God, our soceity is so greedy and into immediate gratification. I am almost looking forward to the coming depression so these attitudes will go away.

Also wanted to add that if people had not been dishonest and took downpayment money from others, house prices would have not gotten out of control. The bubble would have been identified earlier, smaller in size, and easier to fix.

[Anonymous]

I think the bubble had many causes, including low global interest rates and relaxation of lending standards, including tiny or zero downpayment requirements, ninja loans where people lied about their incomes etc.
I don't think people borrowing money from their parents was a significant factor, and I have never seen any analysis suggesting that was the case. After all, what would happen if people couldn't pay both the parents and the mortgage company back? chances are that they would continue to service the mortgage and work out some kind of unofficial forbearance with their parents.

[Anonymous]

Anonymous wrote:
Also wanted to add that if people had not been dishonest and took downpayment money from others, house prices would have not gotten out of control. The bubble would have been identified earlier, smaller in size, and easier to fix.

How is accepting a down payment being dishonest? Banks have gift letter forms for a reason. Some of you are just mad because you didn't have anyone to help you. "Well I had to do this so you should too!!" Get over it and be glad you were in the position to not need the assistance.

Also, accepting a gift doesn't mean you can't afford a house. In many cases, mortgages are less than the rent people are paying so they'll be able to have a little cushion in order to save more money.

Don't try to act like people getting help with a down payment is new because it's not. My parents had help when they bought their first house- they paid it back, but still they had help.

[Anonymous]

This is not new or illegal. It sounds like you are making good decisions. Ignore the jealous poster.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
Also wanted to add that if people had not been dishonest and took downpayment money from others, house prices would have not gotten out of control. The bubble would have been identified earlier, smaller in size, and easier to fix.

How is accepting a down payment being dishonest? Banks have gift letter forms for a reason. Some of you are just mad because you didn't have anyone to help you. "Well I had to do this so you should too!!" Get over it and be glad you were in the position to not need the assistance.

Also, accepting a gift doesn't mean you can't afford a house. In many cases, mortgages are less than the rent people are paying so they'll be able to have a little cushion in order to save more money.

Don't try to act like people getting help with a down payment is new because it's not. My parents had help when they bought their first house- they paid it back, but still they had help.

It isn't new, I know. It is dishonest because the bank assumes you have your own money. There are rules regarding it. I didn't take money from my parents because we didn't have to because we saved up our down payment. I am unlike most Americans because I have zero debt and live well within my means. This orgy of credit hasn't been a good thing for Americans. I don't care what you say, I know it is far cheaper to rent in this area than to buy. People wrongly buy into the dream of home ownership.

Again, I stand by my statement: if you cannot save for a down payment, you have no business buying a house.

[Anonymous]

Also wanted to add that if people had not been dishonest and took downpayment money from others, house prices would have not gotten out of control. The bubble would have been identified earlier, smaller in size, and easier to fix.

The problem was huge, but it wasn't due to people being dishonest and taking downpayment money from others. It was due to the banks not requiring any downpayment whatsoever, or proof of income, or even evidence of legal status. If you could fog up a mirror, you could get a loan. What the OP is doing does NOT compare and if it comes close, she won't be able to get a loan in today's conservative environment.

I don't care what you say, I know it is far cheaper to rent in this area than to buy.

Demonstrably false: http://dc.urbanturf.com/articles/blog/trulia_still_cheaper_to_buy_than_rent_in_dc/3401

[Anonymous]

Anonymous wrote:

Also wanted to add that if people had not been dishonest and took downpayment money from others, house prices would have not gotten out of control. The bubble would have been identified earlier, smaller in size, and easier to fix.

The problem was huge, but it wasn't due to people being dishonest and taking downpayment money from others. It was due to the banks not requiring any downpayment whatsoever, or proof of income, or even evidence of legal status. If you could fog up a mirror, you could get a loan. What the OP is doing does NOT compare and if it comes close, she won't be able to get a loan in today's conservative environment.

I don't care what you say, I know it is far cheaper to rent in this area than to buy.

Demonstrably false: http://dc.urbanturf.com/articles/blog/trulia_still_cheaper_to_buy_than_rent_in_dc/3401

It depends on the neighborhood! I live in AU park. There is a rental house (my neighbors live in it) that rents for $2400.00 a month but would sell for around $800k (assuming normal 20% down etc for mortgage terms). How is that cheaper? And I am not asking you to factor in taxes, insurance, and maintenance.