I don't want to get into too many personal financial details, so I will try and keep this really simple. DH and I previously owned a home, sold at a significant loss that left us with a fairly large debt in addition to our already existing school loans. We've resisted purchasing another home for fear of getting in over our heads and focusing on paying off debt.
In laws have been pressuring us to look at houses and buy while rates are so low, long story short, a situation arose which I'll admit has come together quite well so far and a home we can afford in the place we want it. However, we started looking in the first place and jumped into this because it was implied to us on more than one occasion that we would have help with down payment, closing costs, etc. By implied, I mean, specific conversations of, "we can't afford it," oh we'll help you!" Well, now we're in the thick of it and things have shifted. MIL wants us to get the money from a grandparent, who has it and is willing to LEND it and then encouraging us to borrow to pay grandparent back and this is getting all sorts of complicated and VERY uncomfortable.
We want the home, we're approved for the loan, we have a signed contract to purchase the home, but are basically being told, we'll get you X amount of dollars, but it's no longer being offered as a gift, you're going to be expected to pay it back and quickly. And to do so, you are going to have to put yourselves in further debt and unfavorable financial light and potentially risk our approved loan status.
I know it's generous either way and I know it will all work out, because I have full faith this has all just been orchestrated by someone greater than me. But I am really annoyed by the fact that we were led to believe something that obviously isn't true and strongly encouraged to do something against our better judgment after we objected many times and laid out our financial situation. DH is all uncomfortable and won't let me vent about it, just says, I know, I know and quite frankly, I think we need to speak our mind about how hurt and bothered we are about all of this. At the very least, I need to vent about this, I need to talk about how it's made me distrust in-laws and feel that we were manipulated.
Family and finances just don't mix...what a nightmare! And no, there's nowhere else to turn, unfortunately no one in my family has the ability to offer this level of help.
*Updated with another post...a favorable solution for all!
If you need help to buy the house, then you CANNOT afford it. If you can't swing it with NO help--don't do the deal. Bad idea.
It sounds like you are not ready. I'm sorry. It's very dissappointing. I know all about people that say one thing and then do another. They usually say we didn't understand and that we are the ones that are trying to take advantage. In the long run you'll be better off to rent and pay bills like you have been doing.
It's like you're telling my neighbor's story. Only theirs didn't end so well. They were renting the house next door to us (after losing their first home) and they were attempting to buy it. Everything seemed to be working out fine, until the end when somehow in underwriting it was discovered that a family loan enabled them to get to that point -- and it all fell through. Be very careful as you move forward. Lenders are very very skittish these days and deals seemingly made in heaven fail quite often.
Please do not buy a house you cannot afford 100 percent on your own, no matter how much you feel like "it will all work out, it has been orchestrated by someone greater than me."
"On your own" here does include a bank loan -- nobody much can buy a home without one -- but I mean, without any cash at all from parents, grandparents, siblings or anyone outside you and your husband and whatever you work out with a bank based solely on YOUR family income.
In our area so many homes are being foreclosed on because people could not really afford the homes they bought in the first place. If you do not have the money to afford THIS home at this price without outside this cash help, however kindly offered, please find a home you can afford between just you and the bank-- or stay put until you can find one.
There are so many sad, angry Mamasource posts about family relationships gone sour. This situation sounds like a future post just waiting to happen -- if you don't pay back fast enough, if you lose a job, if your husband loses a job, if someone gets ill and you have medical bills, if grandpa gets ill and suddenly needs his cash back this instant for HIS medical bills, if you discover the new house has termites your inspector didn't find and you suddenly need a ton more money to deal with it....Involving others in paying for your home is asking for a world of troubles like these and the list could go on and on.
Go with what your gut and head told you a long time ago when you were not jumping into the housing market because you did not want to court serious debt. You caved to their pressure and found a house you like and it's heartbreaking to give it up, but far, far more heartbreaking to be foreclosed on or have a permanenly damaged relationship with in-laws over money.
From an outsider's view, here is a list of the red flags I see in your post:
1. Large debt from previous house plus school
2. Looking for a home under pressure from someone not responsible for your finances
3. Looking for a home under the expectation of receiving financial help
4. What sounds like serious discomfort on your part and your husband's about the strings attached to the "help" to buy this new house
5. The fact that you are being, in your words, "Strongly encouraged to do something against our better judgment" but are going against your better judgment anyway
6. The fact that you objected many times and have made them aware of your situation, yet are still being pressured and are giving in
7. Your husband is unwilling to speak up about it even though you are both stressed out
I know you needed to vent, but if you were a friend coming to me with this, I would tell you to run, run, run, run! Your gut is telling you this already. It's in almost every sentence of your post. In spite of the low rates, in spite of the good deals, in spite of the perfect house, if you were asking my advice, I'd say, put a stop to it now. End the contract, take whatever hit that entails. Take care of your own debt and responsibilities first. Save up some money so you don't have to borrow with so many strings attached. Trust yourself, in other words, and don't be pushed into this decision by people who won't be on the hook for it if things go sour for your family. You don't want to be financially beholden to people who have already proved at the least to be inconsiderate of your circumstances, and at the worst, deceptive.
In order to qualify for your loan, there was a certain debt to income ratio that was calculated by your lender. If you take on more debt by "borrowing" from your family, it could wreck that ratio to the point where the bank won't commit to your loan and the entire deal could fall through. Banks usually want to see where your down payment is coming from and if part of that is in the form of "gifting", the "gifter" will most likely have to sign a form stating that the funds are a "gift" and not a loan. If the down payment $$ is, in fact, more debt (for example, you'll need to pay grandma back), the bank might really have a problem with that (because, in effect, you are not putting down more than 20%, which most banks require these days). Also, if grandma is lending you the money, she needs to charge you interest, which opens up a whole bunch of tax issues (double check all this with your tax accountant, of course). It's not even a matter of "you'll just take on more debt and repay grandma", the bank is going to have to approve this particular approach. Tread carefully here. Unless this house is a goldmine, I'd probably walk from this sticky situation.
If any part of this stinks to you, DO NOT do it! While it sounds nice that people want to "help" they usually make things worse. I'm sure their intentions are good but you have to think about what's best for you!
A gift is different from a loan. A loan means more debt. If you accept a loan, then you should go into the purchase knowing you are financially able to pay off both loans, and pay all your other loans and bills. If not, don't buy the house. It's not too late to back out.
I just have to ask: who is the "greater" person you mention? Your MIL? God? If it's God, as far as I know he's not in the business of paying off loans, so I don't understand your logic. If I misread that statement, sorry if I sound snippy.
EDIT: After reading another response, I just have to add: No, houses are NOT always a good investment. Haven't we learned anything from the past three years???!?
If it were me I would put a stop to the whole process - i.e., don't move forward (assuming that I was not contractually obligated already).
If family members continued to harangue me I would simply say "we are not going to pile any further debt on the mess we already created with our previous home. Please do not bring it up again. This is painful enough without re-hashing it every few days."
I would not act huffy about it, but I wouldn't discuss it further either.
You're right - family and finances don't mix.
Move on from this . . . your initial instincts were correct imho.
Don't take the money. My in-laws did the same thing to us. They gave us money for our down payment as a gift, but then decided AFTER we purchased the house that it had to be paid back. It took us about 4 years to get it straightened out and it is still a point of contention in our relationship (almost 7 years after the fact). Its not worth it.
Before you make any decisions, I would insist that my husband talk to his parents ("We thought you told us you would give us the money, that's why we went this far with the purchase..."). I know it's uncomfortable, but he should do it (not you). I guess maybe that's not what they meant by "help"?
A house is always a good investment, and you'll dig yourselves out eventually. This IS a good time to buy....
Then again, you may resent your in-laws forever! Hmm... this is a tough one. I feel your pain.
And so you are looking to cover the down payment you thought they would "help" with by taking a loan from your TSP? Don't do it.
I agree with the others who say that you should run, not walk, away from this. You guys know you aren't ready to handle the expense (too much debt hanging over you) comfortably, and you certainly DON"T want to borrow from your retirement and tally that repayment into the minus column of your disposable income.
Yes, we have borrowed from the TSP and repaid it. The others are correct, there is no tax penalty (unless you separate from the government before it is paid back in full). It is automatically deducted from your paycheck, and you will have that much LESS disposable income until that is fully repaid. It will come out just like taxes do, you won't ever see it, your payroll deposit will just be less.
If you were borrowing for a finite one time deal to solve all your financial cash flow problems with one fell swoop, then I'd say go for it. It is a low interest loan to yourself. But that isn't the case here. You are saddled with other debts in ADDITION to the TSP loan you are considering. And as you know, with the purchase of a house come many other "unexpected" expenses.
How much earnest money did you guys put down on this house? I'd try to let the deal fall through without losing the earnest money. What deal-breaker caveats are in your offer? Did the house pass inspection? Did they make a counter-offer that you maybe haven't accepted yet?
Uh no, this was not "generous". And family and finances does NOT mix. This is a tough lesson learned for you. It appears you and your husband are old enough to make decisions on your own about what is best for your family without any input from others. Unfortunately, you fell for the peer pressure and now it's biting you in the butt...big time. THAT SUCKS! I swear, I hate family sometimes. I went thru something similar with my mom...she sold her house in CA at the PEAK, made about 250k on it. She gave me and my ex 55k to put down on a house here in AZ. Long story short, divorced, lost the house in a short sale...and now my mom being in a financial pickle decides she wants me and new hubby to pay her back the 55k. Uh, ok, let me just cut you a check!!! So NEVER again will I even "borrow" $20 bucks from a family member! Ok, just venting...I feel better now. I guess I just want you to know that if you do this...it will hang over your head FOREVER...I would try to do everything I could to just get out of it, get back to focusing on paying off debt and getting everything in place and when the time is truly right to buy another home...you will know it. Good luck!!!!
It sucks, but I would turn down the house. You know you are in over your head. Go with your gut.
And the next time your inlaws open their mouths about you and your husband owning a home, tell them that they are already aware of your financial situation and that this subject is not open for discussion.
Don't go into debt with family. It will only make your life miserable.
I would say walk away, but i'm wondering if you have posted before and are currently living with the inlaws and that might be worth the debt just to get away. but it really doesn't sound like a good idea.
Don't buy the house. Another one will come along. This isn't meant to be if it's causing you this much discomfort.
I would not move forward. Another house that you love even better will come along at the right time. If your gut is saying no, then go with it.
I agree with those who have said No. I won't reiterate their points. Just to add, your day will come and will feel much better when you are comfortable and don't feel pressured and manipulated. Wait for that day, don't let anyone rob you of it, however well meaning they are.
All "HELP" is not created equally. This obviously why you are stressing. I never would have been lured into this trap.
If you can get out of this deal gracefully. It would be better for your family (husband and children) if you bowed out. However if you can't come up with the down payment, the deal will fall apart anyway.
The real lesson is you never borrow money to buy your home. Just curious as to why your husband is so easily manipulated by his family and why he isn't willing to stick to your original plan which was a much more condusive plan for you all? Rhetorical question.
Just because the house is great. If your money and I do mean your money is funny you can't have it.
Talk to your lawyer and bow out of this deal as quick as you can.
I'm all about getting out of debt! I NEVER borrow money from family or friends since they can turn on you. If the situation is starting to make you feel uneasy and frustrated, it may be a sign that going forward is the wrong thing to do. It sounds like too many people are trying to direct you and your husbands decision when it just needs to be between you two. If you can't afford the house and would rather pay off debt before buying again, so be it. I say don't borrow any money from any relative or good friend, it could get REAL ugly!
NO, don't do it. It spells trouble to me. IF your instincts say NO, then don't do this.
i'd be upset too. i'm so sorry that your hopes were raised. but i agree with the advice to walk away.
it WILL get better. and your dream home will be out there when you're in a better financial situation.
khairete
S.
You have to realize people will always talk and make promises but when it comes down to it and the reality hits, they back out. You should have not banked on them in the first place and keep an open mind that if it comes thru it's a blessing.
Your priority is getting the home you want at the best interest rate and in a location you want. You are already approved so take the loan (which I would prefer anyway - that way I am not obligated to feel I got a hand out and have them talk about it OR worse yet brag about how they helped me) - and deposit on the home.
Trust that with the payment you will be able to repay your inlaws in time. If you're that hurt about it, then let them know you are disappointed but don't stress over it. People change their minds.
The best thing is to plan for how you will pay them back so that you are not in conflict with them over money again..that's worse.
My DH and I have made plenty of mistakes w/ money! We are also working hard at paying off debt- thanks in large part to Dave Ramsey and his Total Money Makeover, we've made huge positive changes in our lives, and our future's looking much brighter. Around here, my DH and I say WWDRD? (What would Dave Ramsey do?)- lol
Here are a few articles from his website that you might find helpful.
http://www.daveramsey.com/article/how-much-house-can-you-...
http://www.daveramsey.com/article/the-danger-zone/lifeand...
BTW- I agree w/ all those who say, "back out!"
Very best wishes!!! :o)
I think instead of being upset with them, you should be more upset with yourselves for not coming straight out and asking exactly what does "oh, we'll help you" mean.
How much will you lose if you back out now? Seriously, I would call the ones who offered you the money and who encouraged you to do this and I would ask why it changed from gift to loan. I would also say you are thinking about backing out because you and your DH know you can't afford it. I would back out because you WILL resent them more later.
