Post # 1
We will be first time home buyers. It just seems so far away and we would like to buy sooner rather than later instead of ”flushing” away money into rent…
Has anyone here borrowed their down payment?
My mom once offered to lend us the down payment using her line of credit with low interest rate, that way we could tell the back that our down payment was a ”gift” instead of a loan, but I don’t know how comfortable I am with borrowing that much money from my mom…
Thoughts and experiences?
Post # 3
I don’t think it’s a good investment since you’ll be paying interest on the down payment AND have monthly payments. Considering the interest, you’ll probably end up paying less in the long run if you rent for another few years while saving up. Have you sat down and calculated your monthly loan and mortgage payments vs. rent?
Post # 4
@AlwaysSunny: Yes a bit, it would be a few hundred $ more a month to own + a few hundred for loan repayment; we are aiming low, but it would definetly cost more monthly. I am very unsure of which one would save us money in the long run… probably renting and saving…….
Post # 5
Personally, borrowing money from family rarely turns out well for people. So I say, find a cheap place to rent and save up.
Post # 6
The only time I would borrow for something like that is against my 401k if I absolutely had to.
Post # 7
Can your mom otherwise afford to loan you the money in cash? I dont think I would feel comfortable at all accepting money from my parents if I knew they could not really afford it and had to take a line of credit out for me. Can you put less down? Or get two separate loans to avoid the PMI? Not sure how it works in Canada, but a lot of people in the US do it that way.
Post # 8
I seem to recall needing to disclose receiving money from others toward your down payment to your mortgage company – I remember signing a zillion documents but I’m pretty sure one of them is to certify that the money you are bringing to the table is your own. Also if you are gifted more than a certain amount you have to pay taxes on it (at least in the US).
Have you looked into whether there are any first-time homebuyer initiatives in your area? I think in my state there are programs for first time buyers that have much lower minimum down payment requirements.
Post # 9
@pinkshoes: My mom already has the line of credit and wants to use it, she was almost insistent… I hadn’t considered getting two different loans, good to know.
@reebee: We can put as little as 5% down. There are programs with 0 down, but of course that means higher interest rates… I have also seen Rent to Own programs…
Post # 10
- Wedding: October 2011 - Bed & Breakfast
I see a whole host of issues here. Why not just be patient and save the down payment money on your own?
Post # 11
@reebee: Exactly this.
We just bought a new house and we had to disclose the funds we had available and verify that they were truly ours. our lender also told me that up until the closing, for any “payments” (outside of paychecks of course) into our banking accounts of more than $500, we needed to provide him with a copy of the check and the reason for the payment.
They REALLY don’t want to see you borrowing the downpayment. (And you have to provide months of banking history, so it’s not like you can just slip the money into your account and say it was there all along).
Have you considered FHA? I’m pretty sure it’s 3.5% down.
Post # 12
I have relatives that accepted a down payment from their parents, but it turned out to be a tiny bit problematic. Any time there were issues in the family, the down payment “gift” was brought up. To borrow something that has interest on it… is not a super-smart move. You don’t want to be house-poor. I would just keep saving till you have the necessary down payment that is 100% yours to begin with.
Post # 13
We are from Ontario too.
We borrowed $10,000 from my mom for our down payment. Even though we borrowed it, we told the bank it was a gift and my mom had to fill out a form and sign that it was indeed a gift. Simple as that. (We went through BMO, fyi).
We paid my mom back in 3 months, before we moved in. We were super motivated to pay her pack. Even though we ended up telling the bank before we signed the docs “oh yea, it wasn’t a gift.. its already paid back” she said “pretend I didn’t hear that.. it was a gift and you are not paying it back and she needs to sign this form”. Ok then.
We didn’t pay interest, because she gave it to use from her savings account, but I think we gave her like $100 at the end as a thank you.
Post # 14
Ok, I’m going through this as we speak. Gift funds are allowed from immediate family members (mom definitely works). BUT they can not be a loan. Your mom will have to sign a “gift letter” stating that she gifted you this money with no expectation of being paid back. They will need a copy of her bank statement showing the money in there, showing it come out and a copy of the canceled check.
They only allow gifts because they do not want you having another monthly loan bill on top of your mortgage.
I was gifted 1/2 of my 3.5% (FHA) downpayment. I also had to show the money going into my savings account and include a letter that states it was a gift with no expectation of repayment.
My new mortgage (including Private Mortgage Insurance) will be lower than my rent.
Post # 15
You need to take into consideration what happens to your mom if you default. You have no idea what the future holds. You or your husband could get sick or in an accident and not have the money to pay back the loan. This could ruin your mother’s credit, and they could go after her for repayment. Especially if she is approaching retirement, they could go after those funds and put her in jeopardy to retire on time. This will likely cause a large toll on your relationship, and may not be worth the risk.
Also, make sure that you have a contract with your mom on payment terms that you both sign. It will protect everyone involved and reduce (but probably not eliminate) hard feelings.
Also a tip if you are using a loan from your parents for downpayment; make sure they give it to you and it sits in your bank account for at least 2 statements (2 months). When you get a mortgage, the bank always makes you show 2 months worth of bank statements, and if they see a large influx of cash that wasn’t from your employment during those 2 months, they will see that as a huge red flag and may deny you a mortgage.
Post # 16
i wouldn’t borrow money for a down payment.
i would sit down and put together a plan. set yourselves a down payment goal and then discuss how and when you willl achieve it. there may be a few or a lot of compromises depending on how badly you want to achieve this goal. eat out less, movie nights in, no extra spending. can you move to a cheaper apartment for the next year or two to safe money. can you pick up some overtime or get a part time job?
where there’s a will, there’s a way.