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Borrowing money for a down payment
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amother
Jetblack


 

Post Tue, Dec 19 2017, 4:09 pm
Looking for some thoughts and input-
My husband and I both currently have good jobs. We don't have much in savings at this point because my husband was in kollel for a few years and our childcare costs were astronomical. By the time the summer comes I hope to have about 30-35k in savings.
My family has advised me that I should be buying a house already because once I start paying real tuition and having more kids my expenses will just be too suffocating and it will be impossible to save. House prices in frum neighborhoods keep rising. I fully agree with them.
They are of the philosophy that if you are forced to pay a mortgage you make it work. With our incomes we will probably struggle Slightly to pay a mortgage for a few years but from what I've heard that's how it is for most people. We have good stable jobs in good industries. We have family who will lend us the money with a very slow payback schedule.
We are looking at homes in the $450-500k range with about $13k in property taxes. The mortgage would probably come out between 2800-3300 a month (if we borrow more than the mortgage is lower obviously). We would have to borrow the full down payment and then some money to do very very basic work in the house (painting etc). We would only be able to cover the cost of the closing.
My question is would you feel comfortable borrowing $50,000-$100,000 from family? Is this too much of a burden?
There's no question that I will get stuck if I don't buy a house soon. It's not like we can say we will have $100k in a few years. Furthermore, house prices will be way higher by that point anyway which just negates the whole reason for waiting.
What are your thoughts on this arrangement?
No criticism or unkind words please.
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mommy3b2c




 
 
    
 

Post Tue, Dec 19 2017, 4:13 pm
If my family would happily give it to me, I would happily take it. Obviously, you need to make a payment plan and start paying them back right away.
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cm




 
 
    
 

Post Tue, Dec 19 2017, 4:19 pm
How long is this payback schedule, and do you think the debt will affect your relationship?

If you can't afford the house and don't anticipate being able to afford it, don't buy it. As you pointed out, your expenses will increase considerably once tuition kicks in. Will your income also increase? Is there an option of buying a much less expensive home?
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simba




 
 
    
 

Post Tue, Dec 19 2017, 4:21 pm
Sit down and do the math, if you can see yourself paying it back in a reasonable amount of time, 3- 5 years, then you should go ahead.
That is very nice that you have family willing to lend you that's much.
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amother
Firebrick


 

Post Tue, Dec 19 2017, 4:25 pm
Although I dont feel comfortable borrowing from relatives, I think you should do it because it is very difficult financially once you are paying tuitions and houses keep going up. However, you must be able to pay it back and you should pay it monthly like you do the mortgage so that it is not on the "back burner". However, make sure you budget how you will pay your mortgage each month because you wrote "people just make it work" but some people cant so the house foreclosed. Of course, you said you and your dh have high paying jobs so with budgeting you should be able to manage. Hatzlacha.
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amother
Royalblue


 

Post Tue, Dec 19 2017, 4:33 pm
mommy3b2c wrote:
If my family would happily give it to me, I would happily take it. Obviously, you need to make a payment plan and start paying them back right away.


Agree.
You don't want to end up down the road with a full house BH and still renting with growing tuition rates and additional bills that crop up as the kids get older (trust me it ain't fun). If you have the opportunity now, grab it.
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amother
Chocolate


 

Post Tue, Dec 19 2017, 4:38 pm
Be careful. If you borrow the down payment you may need to disclose that on your mortgage application. Your house will be 100% leveraged. You may wish to treat the loan as a gift. Which you will gift back...
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amother
Crimson


 

Post Tue, Dec 19 2017, 4:39 pm
I don't see how you will be able to pay both a mortgage and pay back a family loan. If you don't see yourself having 100k for a down payment in a few years from now while you are renting, how do you plan on paying back that 100k within the next few years while paying a mortgage (which is usually higher)?

We were able to afford our house because we rented an apartment and lived there for the first 8 years. Our rental was less than half of what our mortgage currently is.
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naturalmom5




 
 
    
 

Post Tue, Dec 19 2017, 4:43 pm
Its hard to answer based on the facts you provided. If your family is worth 50 million, then take the 100k. If they are also struggling and barely make 40k a year, don't take even if they offer..

In between those extremes, use common sense. I personally, would sleep better and feel more comfortable taking from a gemach or paying a little interest, rather than getting involved with relatives, if it's not a gift blev shalom
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doctorima




 
 
    
 

Post Tue, Dec 19 2017, 6:24 pm
Borrowing some toward a down payment is quite common. Borrowing as much as 100k when you've only saved 1/3 of that and anticipate increasing expenses doesn't seem like a fiscally responsible plan at this point.
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Busymom104




 
 
    
 

Post Tue, Dec 19 2017, 6:29 pm
OP here
It could take me 10 years to pay back 100k. And I cannot wait another 10 years to buy a house. At that point prices will have gone up a lot and I'll have more expenses.
The money is coming from family who is very much able to lend it but it is not a gift. They know our situation and don't need the money back anytime soon. Also my husbands salary should increase a lot within the next 5-10 years so we should be able to pay more back in later years ..
And yes as per the mortgage broker it would be considered a gift.
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Busymom104




 
 
    
 

Post Tue, Dec 19 2017, 6:31 pm
Our combined income would be around $180k at that point. Two kids and very high childcare costs - highest possibility would be around 25k a year in cash.
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petiteruchy




 
 
    
 

Post Tue, Dec 19 2017, 6:39 pm
I borrowed 50k from my parents for a similar priced home. However we have a tenant so the mortgage was easily affordable. Without a tenant, there is no way I'd do the same thing.

My parents own their own business and wrote us up a contract with a payment schedule. When we had some unexpected expenses related to the house, they deferred our payments for 5 years without interest, again, with a written notice. I feel good about our agreement because they'll get their money back with interest. My father needs the money back by the time he retires, so we have a firm end date.

Ideally, you'd find a way to rent out part of the house, for at least a few years. To me, that's the only way to make it a reasonable choice when it comes to the numbers you're talking about.
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Busymom104




 
 
    
 

Post Tue, Dec 19 2017, 6:40 pm
I can technically borrow only $50k and put only 10% down but then my mortgage payments are significantly higher and will include $200 of PMI.
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amother
Amethyst


 

Post Tue, Dec 19 2017, 6:45 pm
amother wrote:

We were able to afford our house because we rented an apartment and lived there for the first 8 years. Our rental was less than half of what our mortgage currently is.


We just bought and our mortgage is over 1K/month LESS than the average rental in the same area.
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amother
Seagreen


 

Post Tue, Dec 19 2017, 7:21 pm
I am in a simular position as you. We have 100k in savings. We make a combined income of 100k and hopefully it will increase to the 150 range in the next five years(though I dont expect it to ever go much further than that). We are looking at houses in the 700 range. We will have to borrow around 50k and my parents and inlaws said they would loan it to us. I am only looking at houses that have a tenant though because on my income its too much of a squeeze to be able to pay mortgage and loans.

I am in the tristate area. Houses are going up way faster than we can save. As long as you have a payback plan and someone has your back and will allow you to defer some loan payments should an unexpected expense come up dont feel bad to borrow. Its really the only way to become a homeowner in the tristate area these days. I am definitely going to be squeezing myself and serving pasta and grilled cheese for dinner but if I dont take the plunge now its.never.going to happen..hatzlocha.
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Mommyg8




 
 
    
 

Post Tue, Dec 19 2017, 7:58 pm
When we were looking to buy our first home, we got two conflicting pieces of advice: 1. Buy now, it's always better to buy than to rent, even if you have to borrow the down payment, and 2. Take your time and don't rush into anything until you have the money.

The first piece of advice came from the financially savvy people, the second piece of advice came from the "quality of life" people.

My opinion? I think that quality of life is an illusion Smile. There will never be a good enough time, so if you see a clear path, just jump!
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simba




 
 
    
 

Post Tue, Dec 19 2017, 8:24 pm
Busymom104 wrote:
OP here
It could take me 10 years to pay back 100k. And I cannot wait another 10 years to buy a house. At that point prices will have gone up a lot and I'll have more expenses.
The money is coming from family who is very much able to lend it but it is not a gift. They know our situation and don't need the money back anytime soon. Also my husbands salary should increase a lot within the next 5-10 years so we should be able to pay more back in later years ..
And yes as per the mortgage broker it would be considered a gift.


I am a quality of life type of person. Go for it! I did it myself so I am talking from experience.
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amother
Indigo


 

Post Tue, Dec 19 2017, 8:43 pm
Does the family need the money - I.e. would "loaning" you the money impact their lifestyle or cause issues in the event that their economic situation changed drastically - I.e. if they lost their jobs for example.

I was gifted with approximately $50,000 as a down payment by my parents. It could have been done as a loan with no payment schedule but my parents treated it as a down payment of inheritances for me and my sibling as we were both gifted with the same amounts to use as a down payment.

I felt no guilt about taking the money but was obviously very grateful as it got me in the door to buy the house. All the other expenses were my responsibility so furniture was sparse the first years and I had to decide what ugly aspects of the place I could live with until I could afford to change :-)

There is a reason that wise people say not to lend money to friends or family that you can't afford to give away. It's because what will happen to the relationship if for some reason you can't pay it back - or can't pay it back and they suddenly need it. It makes for a very awkward situation potentially.

Since your family is treating this as a loan rather than a gift, what exactly are the "easy" terms being offered. If it is a very minimal amount payable every month, then it's probably fine since you are likely to always be able to keep to the agreed upon terms.

However, if it is a vague arrangement like you just need to pay us back however you can afford, whenever you can afford to, I would be wary unless these are truly wealthy people who don't need the money. My parents weren't exactly wealthy when they gifted my brother and I but they had both been New York City teachers with excellent pensions and had lived relatively frugal lifestyles. Their pensions gave them more than enough money to live on and they had retirement investments that they didn't need to use to support themselves.
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amother
Jetblack


 

Post Tue, Dec 19 2017, 8:49 pm
Mommyg8 wrote:
When we were looking to buy our first home, we got two conflicting pieces of advice: 1. Buy now, it's always better to buy than to rent, even if you have to borrow the down payment, and 2. Take your time and don't rush into anything until you have the money.

The first piece of advice came from the financially savvy people, the second piece of advice came from the "quality of life" people.

My opinion? I think that quality of life is an illusion Smile. There will never be a good enough time, so if you see a clear path, just jump!


What do you mean by quality of life ?
Also having a tenant is not an option..
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