Cosign or write loan
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Cosign or write loan
Hi all
My daughter who lives in Rochester and her husband want to buy a home worth $85k. They have been denied a loan because of his bad credit. I don't want to just give them the money, I want them to pay themselves. If I cosign, I assume the risk if they don't pay but they would be rebuilding their credit rating back. If I write the mortgage myself, making it official, I reduce my risk but they would not get the benefit of repairing their credit.
Any opinions on what the best, safest course of action would be?
John
My daughter who lives in Rochester and her husband want to buy a home worth $85k. They have been denied a loan because of his bad credit. I don't want to just give them the money, I want them to pay themselves. If I cosign, I assume the risk if they don't pay but they would be rebuilding their credit rating back. If I write the mortgage myself, making it official, I reduce my risk but they would not get the benefit of repairing their credit.
Any opinions on what the best, safest course of action would be?
John
Re: Cosign or write loan
Perhaps it is time to let them face the consequences of bad financial decisions, rather than rescuing them from it which prevents learning from bad choices. It shouldn't hurt to rent while they are building credit and saving to cover at least 20% down payment.
Re: Cosign or write loan
If you can afford to give them $85K and never see it again, then either option is fine. If they don't pay and you cosign, you may end up paying. If you can't afford that, then I would stay out of it altogether. (You probably don't watch Suze Orman? Every other week some parent is lamenting why they co-signed a loan for a kid…and now they have to pay it.)
I agree with previous post. Maybe it's time they learned how credit works. Unless the bad credit came from an unfortunate accident or medical bills, then can they just work on their credit over time and rent for a while longer?
I agree with previous post. Maybe it's time they learned how credit works. Unless the bad credit came from an unfortunate accident or medical bills, then can they just work on their credit over time and rent for a while longer?
Re: Cosign or write loan
I think it would be best for them to make it on their own. She's a grown up, now. She needs to play the part. If you go either of the routes you're thinking about going, you're going to change the nature of your relationship with her. That could lead to a world of pain. If you happen to have a little bit of anxiety about this subject, it's for a good reason. Listen to it.
- Tim
- Tim
Re: Cosign or write loan
I agree, they need to save up for the house. You do not want to be on the hook for a loan that does not get paid. The husband's credit ought to clear up in about 7 years from the time of the " problem". IF he is paying bills timely,etc. someone already quoted Suze Orman, so let me channel my mother's favorite- Ann Landers, " it's time to wake up and smell the coffee". I think by letting them handle this by themselves shows that you respect them as adults.
Re: Cosign or write loan
Don't co-sign. It will likely end badly.
Re: Cosign or write loan
lovetogolf wrote:Hi all
They have been denied a loan because of his bad credit.
If they were denied because of his credit, why not have her get the loan without him?
Re: Cosign or write loan
If they were denied because of his credit, why not have her get the loan without him?[/quote]
OOOH good idea!
OOOH good idea!
Re: Cosign or write loan
"They have been denied a loan because of his bad credit."
Do not in anyway get involved with their financial matters.Trouble.
As grown adults ,they need to get tough and become fiscally responsible on their OWN .
Do not in anyway get involved with their financial matters.Trouble.
As grown adults ,they need to get tough and become fiscally responsible on their OWN .
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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Re: Cosign or write loan
Your daughter has married a man with bad credit. That doesn't make him a bad person, just a person with bad credit. This is a problem that they need to work through as a couple. They should rent for a few years, pay their bills on time, and his credit will improve over time. They should save a solid emergency fund, and a solid down payment. Then if they want a house, they can qualify for a mortgage as a couple.
If you cosign you risk them defaulting and you being stuck with the payments and possibly damage to your credit. I don't know in that case if they own the house and you own the debt. If you pay for the house and write the mortgage to them yourself you risk them defaulting and your losing the money. In either case your and your daughter's relationship with each other risks being damaged forever.
If your daughter uses her own credit and qualifies for a mortgage on her own, she risks she and her husband as a couple defaulting, damaging her credit, and her relationship with her husband.
Working through this as a couple will be good for their dignity and self respect and they will learn about money management in the process, all of which will serve them well the rest of their lives.
If you cosign you risk them defaulting and you being stuck with the payments and possibly damage to your credit. I don't know in that case if they own the house and you own the debt. If you pay for the house and write the mortgage to them yourself you risk them defaulting and your losing the money. In either case your and your daughter's relationship with each other risks being damaged forever.
If your daughter uses her own credit and qualifies for a mortgage on her own, she risks she and her husband as a couple defaulting, damaging her credit, and her relationship with her husband.
Working through this as a couple will be good for their dignity and self respect and they will learn about money management in the process, all of which will serve them well the rest of their lives.
I don't know anything.
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Re: Cosign or write loan
The banks definition of a cosigned loan is "they won't/can't pay for this so lets make this fool do it"
Ether give the full amount as a gift or walk away.
Ether give the full amount as a gift or walk away.
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Re: Cosign or write loan
They have bad credit already, there's probably a reason.
If you cosign, and those same behaviors repeat (late/missing payments ...) by the time you find out,
your credit rating may be shot, and you'll still have to pay off the loan.
http://www.thefiscaltimes.com/Articles/ ... edit-Score
lists cosigning as one of the top 5 easy ways to ruin your credit score.
If you cosign, and those same behaviors repeat (late/missing payments ...) by the time you find out,
your credit rating may be shot, and you'll still have to pay off the loan.
http://www.thefiscaltimes.com/Articles/ ... edit-Score
lists cosigning as one of the top 5 easy ways to ruin your credit score.
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Re: Cosign or write loan
Thanks for the responses. This is a very tough crowd!
More info. They just had a baby ( our first granddaughter) and live in a tough neighborhood in Rochester so I really want them to move. I had considered just buying he house for them outright as we can well afford it but want to make them pay it off and build some credit.
My wife wants to just give them the $85k. I don't but I'm not sure if I should cosign or write the loan myself, have an attorney draw it up legally and collect.
I do appreciate the sentiment that they should dig themselves out of the hole but I want to help.
So back to the original question. If I ignore all the sound good advice and help them, which option would be better?
More info. They just had a baby ( our first granddaughter) and live in a tough neighborhood in Rochester so I really want them to move. I had considered just buying he house for them outright as we can well afford it but want to make them pay it off and build some credit.
My wife wants to just give them the $85k. I don't but I'm not sure if I should cosign or write the loan myself, have an attorney draw it up legally and collect.
I do appreciate the sentiment that they should dig themselves out of the hole but I want to help.
So back to the original question. If I ignore all the sound good advice and help them, which option would be better?
Re: Cosign or write loan
If the wife wants to give them the $85,000, not loan or cosign, you might make a deal that they put X amount each month into a 529 plan for the new Granddaughter.
Re: Cosign or write loan
There ain't no good way, given the choices you present. Do you really want to foreclose on an 85 k house in Rochester? You holding the paper is the only way to safeguard your credit, you will need to charge interest at the legal rate.
Re: Cosign or write loan
Tough crowd indeed. Here's an idea, do either of them have direct deposit from their employer? Perhaps you could cosign, set the mortgage to autopay from a checking account in your name, and require that the mortgage payment be directly deposited into the account each month (pad the account by one months payment so your "credit isn't ruined"). That would seem to combine the benefits of both of your contemplated approaches.
Re: Cosign or write loan
I strongly advise against just cosigning the mortgage loan. Not only could you lose the $85,000 - BUT you could become entangled in a mess doen the road - and a mortgage loan is a long term entanglement. How you otherwise might assist/help depends on all the facts, circumstances and assumption of risks you are willing to take on.
I suggest just giving them the $85,000 may be a bad idea - if the husband is subject to the same issues that led to having bad credit.
1. Would they qualify for a smaller mortgage if they had (you make a gift) a significant downpayment? That puts the major burden on them - and a modest commitment on you (of the gift) and there are no entanglements to you.
2. Although there are issues and risks, might you buy the house (for cash) and rent it back to them - perhaps with an agreement (of some sort) crediting some part of the rent towards a down payment in the future when they can qualify for a mortgage. That might provide an incentive for them (him) to clear up these credit problems.
3. A litle better than a straight gift (perhaps) might be to allow them to get a "share secured" loan from a credit union for the longest period allowed by that credit union and you deposit the $85,000 in savings at that credit union. All you can lose is your money - and they would make the loan payments to the credit union. That would help their credit history. They take the $85,000 and buy the house. Maybe (not sure how exactly) you could be some kind of lienholder on the house title.
As you know and see from this discussion - there are many kinds of risks involved, as well as things that you might do that are actually harmful (in the long run) to them - despite your good intentions.
I suggest just giving them the $85,000 may be a bad idea - if the husband is subject to the same issues that led to having bad credit.
1. Would they qualify for a smaller mortgage if they had (you make a gift) a significant downpayment? That puts the major burden on them - and a modest commitment on you (of the gift) and there are no entanglements to you.
2. Although there are issues and risks, might you buy the house (for cash) and rent it back to them - perhaps with an agreement (of some sort) crediting some part of the rent towards a down payment in the future when they can qualify for a mortgage. That might provide an incentive for them (him) to clear up these credit problems.
3. A litle better than a straight gift (perhaps) might be to allow them to get a "share secured" loan from a credit union for the longest period allowed by that credit union and you deposit the $85,000 in savings at that credit union. All you can lose is your money - and they would make the loan payments to the credit union. That would help their credit history. They take the $85,000 and buy the house. Maybe (not sure how exactly) you could be some kind of lienholder on the house title.
As you know and see from this discussion - there are many kinds of risks involved, as well as things that you might do that are actually harmful (in the long run) to them - despite your good intentions.
Re: Cosign or write loan
I really like your honesty I wish you the best of luck. It's a hard position to be in.lovetogolf wrote:So back to the original question. If I ignore all the sound good advice and help them, which option would be better?
The best option if you must be involved is to simply give them the money. A gift, with no strings attached to it, is within your power and would not put a strain on the relationship. You should consider the impact on the husband, though. How will he feel with his father in law providing a loan, co-signing or giving him the money for the house? They are one, now.
- Tim
Re: Cosign or write loan
Be aware of the gift tax exclusions. The 2015 limit is $14K per recipient per person. So you and your wife combined could give your daughter $28K and your SIL $28K for a total of $56K. The remainder of the cost of the house would count against your lifetime exclusion if you bought the house outright. . If they could find a company to underwrite the loan, could they qualify for a mortgage with 50+% down?timboktoo wrote:I really like your honesty I wish you the best of luck. It's a hard position to be in.lovetogolf wrote:So back to the original question. If I ignore all the sound good advice and help them, which option would be better?
The best option if you must be involved is to simply give them the money. A gift, with no strings attached to it, is within your power and would not put a strain on the relationship. You should consider the impact on the husband, though. How will he feel with his father in law providing a loan, co-signing or giving him the money for the house? They are one, now.
- Tim
Or could you buy the house they are interested in and rent it back to them with the idea they would buy it from you when they can qualify for a mortgage? That would prevent any non-payment on their part impacting your credit without you knowing it. If you set a market rate rent, then you can treat it as a business transaction from a tax perspective. Of course if they fail to pay the rent this could impact your relationship so it is far from the perfect solution.
I would definitely NOT co-sign the loan since they coluld be telling you one thing and doing another leaving you on the hook for the mortgage.
EDIT: Honest, I didn't see DM200's response before I posted mine!
Last edited by cherijoh on Wed Jan 21, 2015 8:05 pm, edited 1 time in total.
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Re: Cosign or write loan
If they are in an unsafe neighborhood then they should move somewhere safe and rent.
If you insist on making possible the purchase of a home which they cannot afford and for which they cannot qualify due to bad credit, then the best way is to purchase a home outright in a stable area which will likely have good resale value in a few years and let them live in it rent free but responsible for routine maintenance for the next 5 years. Over that time they pay bills on time, save an emergency fund and down payment, and his credit will improve.
They then get a mortgage on their own merits from a bank to purchase the property from you at the market rate, or they can buy another house and you sell the one you bought. If they can't do it themselves then, they move into an apartment.
That will fulfill your wishes to have your daughter and grandchild located in a safe neighborhood and in a house. It will relieve them of some financial pressure by not having to pay rent or mortgage payments. It will give them the opportunity to establish financial stability and credit as a couple. Your financial risk will be markedly reduced. Your and your family's risk of damaged relationships from their failure to make payments will be eliminated.
If after the 5 years they are financially responsible, with a solid emergency fund and down payment saved, and with good credit for each of them, you decide to gift them the house or cash to either afford a nicer house than they cold on their own or a lower mortgage than they would otherwise have, you will be making the gift to a couple who have worked through their financial issues and become financially responsible and knowledgeable. If they have failed to achieve that goal, then you will have to make the decision as to whether to continue to fund financial irresponsibility or to let them live at the level they merit.
I would consult a real estate attorney for advice on this and to have the rental agreement drawn up so as to protect all parties.
(If you charge them rent or require them to deposit money anywhere, you need to decide in advance what you are going to do about it if they renege. If you don't have a plan for that contingency that is enforceable and that you will in fact enforce, then don't require it.)
ETA: The plan I'm proposing also gives the marriage 5 years to see how it is going. If it is going well - good. If it is crumbling or has broken up, you will not have purchased a house for an ex son in law.
If you insist on making possible the purchase of a home which they cannot afford and for which they cannot qualify due to bad credit, then the best way is to purchase a home outright in a stable area which will likely have good resale value in a few years and let them live in it rent free but responsible for routine maintenance for the next 5 years. Over that time they pay bills on time, save an emergency fund and down payment, and his credit will improve.
They then get a mortgage on their own merits from a bank to purchase the property from you at the market rate, or they can buy another house and you sell the one you bought. If they can't do it themselves then, they move into an apartment.
That will fulfill your wishes to have your daughter and grandchild located in a safe neighborhood and in a house. It will relieve them of some financial pressure by not having to pay rent or mortgage payments. It will give them the opportunity to establish financial stability and credit as a couple. Your financial risk will be markedly reduced. Your and your family's risk of damaged relationships from their failure to make payments will be eliminated.
If after the 5 years they are financially responsible, with a solid emergency fund and down payment saved, and with good credit for each of them, you decide to gift them the house or cash to either afford a nicer house than they cold on their own or a lower mortgage than they would otherwise have, you will be making the gift to a couple who have worked through their financial issues and become financially responsible and knowledgeable. If they have failed to achieve that goal, then you will have to make the decision as to whether to continue to fund financial irresponsibility or to let them live at the level they merit.
I would consult a real estate attorney for advice on this and to have the rental agreement drawn up so as to protect all parties.
(If you charge them rent or require them to deposit money anywhere, you need to decide in advance what you are going to do about it if they renege. If you don't have a plan for that contingency that is enforceable and that you will in fact enforce, then don't require it.)
ETA: The plan I'm proposing also gives the marriage 5 years to see how it is going. If it is going well - good. If it is crumbling or has broken up, you will not have purchased a house for an ex son in law.
Last edited by Herekittykitty on Wed Jan 21, 2015 8:21 pm, edited 1 time in total.
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Re: Cosign or write loan
I didn't think about that. Good point.cherijoh wrote:Be aware of the gift tax exclusions.
- Tim
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Re: Cosign or write loan
+1 that's a good idea!jfn111 wrote:If the wife wants to give them the $85,000, not loan or cosign, you might make a deal that they put X amount each month into a 529 plan for the new Granddaughter.
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Re: Cosign or write loan
You buy they house and sell it to them for $100.00timboktoo wrote:I didn't think about that. Good point.cherijoh wrote:Be aware of the gift tax exclusions.
- Tim
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Re: Cosign or write loan
That is actually quite brilliant I love it.brad.clarkston wrote:+1 that's a good idea!jfn111 wrote:If the wife wants to give them the $85,000, not loan or cosign, you might make a deal that they put X amount each month into a 529 plan for the new Granddaughter.
- Tim
Re: Cosign or write loan
I don't think the IRS would buy that strategy.brad.clarkston wrote:You buy they house and sell it to them for $100.00timboktoo wrote:I didn't think about that. Good point.cherijoh wrote:Be aware of the gift tax exclusions.
- Tim
Re: Cosign or write loan
Sorry, that's a gift of $84,900, termed a bargain sale by the IRS.brad.clarkston wrote:You buy they house and sell it to them for $100.00
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Re: Cosign or write loan
I'd think about the impact of how I would feel if daughter and SIL divorced and SIL was entitled to half the equity.timboktoo wrote:I really like your honesty I wish you the best of luck. It's a hard position to be in.lovetogolf wrote:So back to the original question. If I ignore all the sound good advice and help them, which option would be better?
The best option if you must be involved is to simply give them the money. A gift, with no strings attached to it, is within your power and would not put a strain on the relationship. You should consider the impact on the husband, though. How will he feel with his father in law providing a loan, co-signing or giving him the money for the house? They are one, now.
- Tim
How bad is the bad neighborhood? How bad is his credit that they can't move to another neighborhood and rent?
If you're o.k. with SIL getting half the equity in the event of a divorce then buy the house and make annual gifts of equity each year of $14k to each.
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Re: Cosign or write loan
lovetogolf wrote:Thanks for the responses. This is a very tough crowd!
More info. They just had a baby ( our first granddaughter) and live in a tough neighborhood in Rochester so I really want them to move. I had considered just buying he house for them outright as we can well afford it but want to make them pay it off and build some credit.
My wife wants to just give them the $85k. I don't but I'm not sure if I should cosign or write the loan myself, have an attorney draw it up legally and collect.
I do appreciate the sentiment that they should dig themselves out of the hole but I want to help.
So back to the original question. If I ignore all the sound good advice and help them, which option would be better?
If you write the loan, are you REALLY willing to put your daughter and family out on the street? If you are, you are the first person who has done it.
However, there is one way out if you have a lot of assets. Lend them the full amount with the realization that they may never pay you back. When it comes to inheritance time, years from now, deduct any unpaid amount from their share.
My FIL was the executor of his mother's estate. When grandmother died, three grandchildren owed money to her. In distributing assets to the heirs, he distributed the receivables to the parents of the grandchildren.
Re: Cosign or write loan
It sounds like there's zero chance you would ever actually take your daughter to court for failure to pay. If that's the case, I don't see the point in paying an attorney $400+/hr or whatever lawyers run in your neck of the woods to draft an agreement that's never going to be legally enforced anyway. Just write something up yourself in plain English.lovetogolf wrote: More info. They just had a baby ( our first granddaughter) and live in a tough neighborhood in Rochester so I really want them to move. I had considered just buying he house for them outright as we can well afford it but want to make them pay it off and build some credit.
My wife wants to just give them the $85k. I don't but I'm not sure if I should cosign or write the loan myself, have an attorney draw it up legally and collect.
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Re: Cosign or write loan
If you give them $56k (gift tax maximum from couple to couple) or loan them $56k they would have a 60%+ down payment which might qualify them for a loan even with horrid credit. By paying off a mortgage successfully they would drastically improve their credit score. This also solves the safety issue of the area where they live.
Don't cosign. Better to loan them the money understanding you might never get it back. if you choose the loan route I'd suggest one loan to the husband for $28k and one to the wife (your daughter) for $28k. That way he won't walk away with your equity as easily in a divorce.
EDIT: I am not a lawyer. Act accordingly.
Don't cosign. Better to loan them the money understanding you might never get it back. if you choose the loan route I'd suggest one loan to the husband for $28k and one to the wife (your daughter) for $28k. That way he won't walk away with your equity as easily in a divorce.
EDIT: I am not a lawyer. Act accordingly.
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Re: Cosign or write loan
The granddaughter can also be a gift recipient so (3 recipients x 14K x 2 givers = 84K). However, I like cherijoh's idea of finding out if they can qualify for a mortgage with a high down payment. Gift them only as much as they need to qualify for such a mortgage. I would definitely NOT cosign!cherijoh wrote:Be aware of the gift tax exclusions. The 2015 limit is $14K per recipient per person. So you and your wife combined could give your daughter $28K and your SIL $28K for a total of $56K. The remainder of the cost of the house would count against your lifetime exclusion if you bought the house outright. If they could find a company to underwrite the loan, could they qualify for a mortgage with 50+% down?
As a grandmother I totally understand where you're coming from, but I'd be reluctant to give my SIL a pass. He needs to have some skin in the game and take responsibility for cleaning up his act!
Enjoy your granddaughter
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Re: Cosign or write loan
Would daughter qualify for a loan if she alone applied and you gave her a large down-payment? I know that would also have issues.
You can gift more, all you have to do is report it, not pay taxes unless you have millions.
You can gift more, all you have to do is report it, not pay taxes unless you have millions.
Re: Cosign or write loan
As the MIL of a SILwho has resented the money I have sent north in order to make my grandkids home safer, etc. I wonder if action on your part would be seen as emasculating to your SIL. Mine calls us "those rich folks from down south" and it is not in a loving tone, either. AND we never bought them a house or spent more than 1,500 at a whack.
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Re: Cosign or write loan
Never cosign a loan unless you're willing to turn it into a gift.
I have another option you may not have considered. Provide a gift that's adequate to bring the loan/value ratio and monthly payment down to something a bank will approve.
It's cheaper than paying off their mortgage when they can't.
It avoids the nasty family effects of trying to collect a loan from your daughter.
It helps them out, makes them responsible for repaying the bank, and puts a cap on your cost.
(I'm assuming that "bad credit" doesn't mean "prohibited from borrowing any amount due to past legal actions".)
I have another option you may not have considered. Provide a gift that's adequate to bring the loan/value ratio and monthly payment down to something a bank will approve.
It's cheaper than paying off their mortgage when they can't.
It avoids the nasty family effects of trying to collect a loan from your daughter.
It helps them out, makes them responsible for repaying the bank, and puts a cap on your cost.
(I'm assuming that "bad credit" doesn't mean "prohibited from borrowing any amount due to past legal actions".)
Re: Cosign or write loan
lovetogolf wrote:Thanks for the responses. This is a very tough crowd!
More info. They just had a baby ( our first granddaughter) and live in a tough neighborhood in Rochester so I really want them to move. I had considered just buying he house for them outright as we can well afford it but want to make them pay it off and build some credit.
My wife wants to just give them the $85k. I don't but I'm not sure if I should cosign or write the loan myself, have an attorney draw it up legally and collect.
I do appreciate the sentiment that they should dig themselves out of the hole but I want to help.
So back to the original question. If I ignore all the sound good advice and help them, which option would be better?
No offense to your daughter or son-in-law, but here's how this type of situation usually plays out. Keep in mind this is the pessimist in me speaking:
Option #1: you give them the money outright, they do not learn they lessons needed to establish financial responsibility. The lack of financial responsibility is usually an indication of broader irresponsible behavior. I know this through personal experience and observing many family members whom I love but have had 50+ years to get it together financially but just never could.
Option #2: You use a lawyer and do everything by contract. But, the baby expenses come, the car breaks down, son-in-law goes through a period of unemployment, and all of a sudden you're the bad guy because you will not waive the rest payment. This option bothers me because you were the generous one from the beginning but now you're the villain. I've been in this situation a few times as well.
So, I think both options are unacceptable but if you insist on a recommendation from only these two, then I say give the money outright and wipe your hands of it. I would not be financially involved in any other way than to give them the money for the house.
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Re: Cosign or write loan
Don't cosign. Don't write the loan. Teach them how to build good credit.
I agree.BL wrote:Perhaps it is time to let them face the consequences of bad financial decisions, rather than rescuing them from it which prevents learning from bad choices. It shouldn't hurt to rent while they are building credit and saving to cover at least 20% down payment.
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Re: Cosign or write loan
This sounds like the safest approach to me if they can do it. The less personal involvement that you have in the day to day issues, the better. Let the credit union be the lender and deal with them about any issues regarding paying the taxes or insurance.dm200 wrote: 3. A litle better than a straight gift (perhaps) might be to allow them to get a "share secured" loan from a credit union for the longest period allowed by that credit union and you deposit the $85,000 in savings at that credit union. All you can lose is your money - and they would make the loan payments to the credit union. That would help their credit history. They take the $85,000 and buy the house. Maybe (not sure how exactly) you could be some kind of lienholder on the house title.
If you do decide to give them a gift, prepare yourself to let go of any "strings" or assumptions that you may have. If SIL is given a gift, it is his (even if they have a contentious divorce). If they own a house with equity and can get a HELOC to pay off credit cards or buy a new car, why wouldn't they? If one of them gets a great job offer and they want to move, the decision to sell the house or rent it out is theirs isn't it?
If you are on the title, watch out for liability issues. If there is a Homeowner's or Condo Association, don't get trapped between them and it.
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Re: Cosign or write loan
From experience I would never recommend loaning the money, having a lender relationship with children can have a devastating impact on all involved. I would give the money or pass altogether. Help find a rental in a better area.
Re: Cosign or write loan
Sometimes we show love by teaching others to fish, and sometimes by giving them a fish. Sometimes we get to do both. You seem like a wonderful father for wanting to help. You have decided you want to give them a fish, and haven't asked us if that is the right decision (which we couldn't really help with anyway because there are so many dynamics you know and we don't know).lovetogolf » Wed Jan 21, 2015 7:14 pm
Thanks for the responses. This is a very tough crowd!
More info. They just had a baby ( our first granddaughter) and live in a tough neighborhood in Rochester so I really want them to move. I had considered just buying he house for them outright as we can well afford it but want to make them pay it off and build some credit.
My wife wants to just give them the $85k. I don't but I'm not sure if I should cosign or write the loan myself, have an attorney draw it up legally and collect.
I do appreciate the sentiment that they should dig themselves out of the hole but I want to help.
So back to the original question. If I ignore all the sound good advice and help them, which option would be better?
Between the options presented I think I'd opt for your daughter and son in law getting a loan and you providing a guaranty or co-signature. Have legal counsel review to assure that your exposure is limited to an agreed upon amount (presumably the principal loan amount), and take steps to assure that you are notified in the event of a default (i.e. per the loan documents and/or by filing a request for notice with the register of deeds), lapse in insurance, etc. I like your thought that this lets them establish credit and buy the home, but keeps you out of being in a direct debtor/creditor relationship with your family.
Good luck ... it's challenging to navigate but we all know there's no owner's manual for parenting .... we just do our best with loving motivations.
Re: Cosign or write loan
Also remember that half the payment on a house that price here in Rochester will be taxes, so they'll be paying those no matter how you structure the purchase price.
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- Joined: Sun Feb 24, 2013 6:53 am
Re: Cosign or write loan
Ok folks. Here is what DW and I decided to do.
I called the bank and spoke to the person they were dealing with. He said in six months to a year of good behavior that he would write them a loan.
So we will carry their mortgage with the understanding that within two years they will reapply and pay it back.
I will charge the 3 percent and maybe a bit more so I can save it up for them to help with closing costs when they apply.
We fully realize this could go south and am prepared to walk away without the money if it does.
D and SIL and thrilled and grateful and agree to our terms.
Wish us luck and thanks for all the responses.
I called the bank and spoke to the person they were dealing with. He said in six months to a year of good behavior that he would write them a loan.
So we will carry their mortgage with the understanding that within two years they will reapply and pay it back.
I will charge the 3 percent and maybe a bit more so I can save it up for them to help with closing costs when they apply.
We fully realize this could go south and am prepared to walk away without the money if it does.
D and SIL and thrilled and grateful and agree to our terms.
Wish us luck and thanks for all the responses.