Calling financially savvy Dopers. Help needed

That’s usually the opposite of what causes trouble in family-business mixes.

Even though home prices and loan rates are extremely low right now, I believe banks are getting very picky about what they want from a borrower to secure a loan. I think a lot of them are back to requiring 20% down and will not let you take a seperate loan out for the down payment.

Or get a second job that pays minimum wage. $7 x 20 hours/week will double your $5K in a year.

Honestly, you don’t have enough money to earn enough return within a year to qualify for a new home loan (we’re talking about anything beyond $30K or so). Your only option is to continue to rent or to find a pot of money somewhere. Even if you can scrounge up the down payment, the question will be your ability to service the mortgage debt. So despite the historically low mortgage rates and depressed housing costs, it’s still a challenge to buy a house without the down payment and a steady income.

This doesn’t really pass the “smell” test to me.

Essentially you’d be borrowing money to serve as the down payment, with plans to pay it back. The bank would have to consider it as a loan, and figure it into the calculation of how much of a mortgage payment you could afford.

The bank is also going to ask where the funds came from. They will want to know if any portion of the down payment is borrowed. If you don’t tell them - either claim it’s your own money or it’s a gift - you’re committing fraud. If you do tell them it’s a loan, they might be less willing to make the mortgage loan.

If it’s a gift, that’s different - but that’s not what you’re talking about. Why should the parents give up on the income on that money for the next year? Why shouldn’t they hold onto it, enjoy the income (such as it is!), then gift / loan you the money next year?

You mention being able to put aside 5,000 dollars (but wiping out your savings to do so). By “put aside”, I assume you mean put toward the down payment? If you hang onto the 5,000, but owe your parents a chunk of money, you don’t really have that 5,000.

Another option is to pay them some interest on the money. At the least, pass through whatever income you get on it. Depending on their situation and yours, they could even act as your mortgageholder in a year (if they have 100K lying around that is).

We’ll have no issue paying the payment. We are a two income household with no children and jointly make over 60k a year. We have excellent credit and almost no debt. What we do NOT have is a big lump of cash money. We certainly can pare back a bit and probably save about 200.00 a month rather easily, and intend to, I was just looking to see what you guys thought to be a good place to store that money in the interim. Our credit union will happily loan us around 100k with 10% down, so that is not a problem. It seems that nothing much is paying, so we will probably just go with a safe option that does not allow us to access the funds and save up. The market isn’t going to rebound overnight after all.

Sigh. The difference would be that if there WAS a place that earned decent interest, I could deposit more into it NOW then having to pay it up bit by bit over the next year. Call it a gift. And I’m paying my mum and dad back monthly while that "gift of the full amount earns interest on the full amount. There isn’t any fraud. It’s just money all at once rather than slowly compounding it up over time. there is no difference. I wouldn’t be pursuing the loan from the bank until after I was finished up with mum and dad. The bank is going to want to know where every cent in my various accounts came from over the last several years? good luck with that.

They’re going to want to know where a $5000 deposit came from, yes. Loan underwriters have a responsibility to track where your income comes from, because your ability to repay them is based on your income and income sources. If they don’t ask, then for all they know, you got that money from dealing/doing drugs (which makes you a poor investment choice, because people in prison can’t pay back their debts and junkies are not well-renowned for maintaining their property), or from theft, or from working under the table (which is not legal, nor reliable income).

This is true. We are in the process of refinancing. We are refinancing at the same place we now have a loan, it is not much, and it is the bank where we have been depositors for 16 years, and we have a damn high credit rating. We opened a new credit card account with Lowe’s where we bought carpet, since we got a discount. The bank wanted evidence that we paid it off - which we did in one month. They are very picky. We’ve been asked about the very thing the OP is planning to do.

I don’t think that’s what Acid Lamp is talking about.

What Acid Lamp is talking about is borrowing $100,000 from his parents at zero percent. Investing it for a year a 3% and pocketing $3k. At the end of the year, he pays his parents back the $100,000 back, then applies for a loan from the bank. The bank may want to know why his account looks like he’s laundering money for the mob, but I don’t think so.

The problem is that it takes a LOT of money to make that sort of interest differential worth while. If you can find a 1 year CD paying 3% on that small amount of money, I think you’d be really lucky. You need more money or more return - and more return means more risk. And more risk right now when you want the money in a year with borrowed funds is a BAD IDEA.

There are a lot of quality stocks right now paying dividends in the 4-5% range. Even the S&P Spider ETF pays about 2.7% dividend. So if the market goes sideways at least you beat inflation and CDs. Downside is those pesky capital gains taxes on short term trades.

The real lesson here is that since you actually NEED the money within 5 yearsit can not be subjected to any risk.

Print that and post it on your fridge, it will come in handy later in life.

There just aren’t a lot of options beyond a CD paying about 1.5%, that’s about $75 before taxes and inflation. Besides the joke about getting a second job, you’re better off living a bit more frugally for a year. It’s not hard to find ways to save $6.25 per month.

But if you are intent, here is a really bad idea: put the money into a dividend paying stock, or an ETF. If it gains by the time you are ready to buy a house then great. If it hasn’t, leave it in place and borrow the $5000 from your parents, essentially “selling” your stocks to them below market. They’ll get paid back when the market returns.

Now that I think of it, you might be better off giving the $5000 to them, and letting them invest it for the year with the rest of their assets. Then when you buy the house they’ll give you the $5000 back plus a little bonus.

Right now, I see two choices:

– If there is a CD that does not have a substantial early withdrawal penalty you might look into that. But interest rates are so low that if there is a substantial early withdrawal penalty then it might just be better to just put it in your savings/checking account in case your plans change.

– Other than that, you could just put it in your savings/checking account and use the time you would have spent figuring out what to do with it to instead figure out how to save more or work longer hours (or a second job, in this economy I can’t figure out if I’m joking or not since even second jobs don’t grow on trees). It’s sad that that seems to be a competitive option versus getting (maybe!) $50 over the course of a year with a CD.

Is that 60k gross or net?

While I understand the desire to get a house now while the prices and the interest rates are low, the fact that saving a relatively modest 8k between two incomes is a modest challenge should give you a pause. $200 per month may be easy, but it isn’t enough. Can you save $650 per month in a house fund without dialing back contributions to retirement?

Gross, approximately.

As to 650.00: Possibly, but that would hurt. You are essentially asking me to pay the mortgage on the house I’d like to buy while also paying the entirety of the rent (which is double that) and all other bills as well. I could possibly find that sort of money each month but it would be a miserable existence. We would have to strip absolutely everything to the bone to wring that from our budget. 400 is far more likely.

Before some of you start in, neither us smoke or buy coffee every morning etc… Most of our fungible money has been spent recently paying up old debt and replacing our cheap, cruddy furniture with long lasting pieces. Now that we are totally set in everything but a home, we are ready to begin that process. We can save some money here and there by cutting the evenings out, nice grocery trips, occasional I tunes purchases, etc… We tend to spend money on experiences rather than fritter it away on daily niceties.

As to a second job…Ain’t going to happen. The economy blows, and Delray Beach is very seasonal in nature. While the snowbirds are coming back, the jobs are not, and I’m about to be too busy with my primary job, (which I am extremely lucky to have) for one anyway.

Bolding mine for emphasis.

Before I saw this post, I had just done the math. If you can put $400 per month in a money market account at the credit union, that’s nearly $5k in one year right there.

Let’s make it a little more achievable. Every week put $100 in the money market account. Preferably, transfer it in every Sunday night or Monday morning. One year later you’ll have your $5k ready to drop as a down payment. Can you put aside $100 each and every week?

The fundamental issue you’re facing, Acid Lamp, is that you need preservation of capital – and the more risk you take with preserving capital, the higher the potential upside (the rate of return). Right now a best-case safe money market account pays about 1%. If you want to earn 5%, you’re going to take substantial risks that the money you put in will not be there a year from now.

Good luck with this! Please keep us updated, I’m interested in following your tale.

Believe it or not, that is what we just decided on! After looking at a few months worth of goofing around, financially speaking, we could easily do about 400 a month, possibly more in my busy season which is starting up.

If it’s that hard to find some extra money each month now it’s not going to get any easier once you get a house. Wear & tear as well as unexpected expenses lurk around every corner. Roof is old and starts leaking? That’s several thousand. Need a new furnace? That’s several thousand. Want to replace that driveway that is crumbling apart? Or have somone repaint the exterior? Several thousand.
Setting yourself up with a mortgage that let’s you “just get by” each month is ill-advised.

I’m aware of that. The mortgage rate would be around 700. We currently rent for 1300, and can afford to put by another 400 after everything else. Where is the problem?

What does the rent include? Because of course beyond the mortgage, you’ll also need to budget for taxes, insurance, electricity, water, garbage, gas, etc, in addition to whatever unexpected expenses arise.

Well of course. We have that 400.00 after the entirety of the monthly budget has been expended. Property taxes and mortgage insurance do not bring it back up to the 1300 we currently spend solely on rent, only about 1000. Buying would actually be somewhat profitable for us in a monthly sense.