My wife and I are looking to purchase our first home before the end of the year. My FIL has offered to buy the house for us, put the house in our names, then act as the mortgage lender. While this is a generous offer, I don't love the idea of sending him a check every month. He also did this for his older daughter, but they are in a different financial situation than we are.

Other than basically being in debt to my FIL, are there other things I'm not thinking of that could cause issues here. What if my wife wakes up and hates me one day? Is the house basically her and her dads despite it being in our names since he is acting as the bank?

I don't think you'd even save on interest because the IRS will require market rate interest on a related party transaction like that. If the note is below market, I think they'd require someone to pay taxes on the imputed benefit?

Would agree with the other responses that money and family can be problematic and that the title is a bit different than what you describe - financing the house for you. Unless you just cannot qualify for a mortgage, I wouldn't even consider that circumstance. And if you cannot qualify, lenders are pretty lax really and money is cheap, you should probably work to get in the position that you can before taking on that burden. If he was truly buying you a house and giving it to you with no strings, I don't know, maybe. To me a lot would depend on his personality and you and your wife's personalities and relationship. The fact you consider the possibility she would wake up mad at you and leave is not a positive.

My wife and I are in the camp that we would like to help our kids with down payments on a first home purchases when that time comes. But it would be a pure gift with no strings attached. Maybe it would be better to just use that money for nice extended family vacations regularly. Thankfully that decision doesn't have to be made yet for us.

We have learned the hard way. About 12 years ago we purchased a small house for my MiL to live in. The initial understanding was that she would pay a reasonable amount every month in rent and we thought it would be easier than having to move her around from rental to rental constantly when we are out of state from her. She paid "rent" for a couple of years. Then without a word or discussion or apology, she just stopped working and stopped paying. So we pay the mortgage and the utilities. The relationship between her and my wife was never awesome, but now it is really pretty bad. But it is kind of an elephant in the room type bad, not a topic that gets discussed - just an external stress and it definitely affects how much we visit. Honestly, to us, it is less about that actual money than about the fact she did not ever discuss it with us or say she was sorry or thank you for helping - just stopped paying. I don't think we really thought it would not go the way it has gone, but it is still a bit frustrating. I eventually thought through it enough that I am at peace with it. I wouldn't be okay with kicking her out, I knew it was likely going to turn out this way when we signed up, it is what it is and I try to think of it as a gift to her and hope karma will work out for us on it in the long run. If nothing else I take solace in the fact that we would have probably had to help financially either way and at least this way we have an appreciating asset and we don't feel too bad letting my wife's siblings, who live in the same city, bear the burden of day to day help and interaction.

Interesting reads, I'll add my own family dealings:

Last year we had the opportunity to buy the house my parents built and I spent my early childhood in, that was sold to a cousin and his wife when I was 5. Cousin died and his wife moved, a family of 7 rented it for 4 years, plus the widow's sister lived in a detached garage apartment.

Owner financing was offered to us with the stipulation that the sister could continue living in the apartment while she was laid off, and we wanted to take it. I'm self employed and my wife was 3 months into a new job, so we were worried about getting a mortgage. Upon first walkthrough we realized we were in over our heads with the home needing a major reno, so we talked to a local lender. Turned out to be a great choice and easy process to get a loan for the house plus the reno exactly how we wanted it. During the reno, the newly employeed apartment dweller blew a gasket over a couple small construction related things, so we drew up a 1 year contract with very reasonable terms for her rent. Over the next week she went absolutely crazy and I told her I'm evicting, it'll take a few weeks for me to get it done so if she's gone before then, no harm/no foul. She left in 8 days.

If we had followed through with the owner financing, I can't imagine how much stress and animosity the sister situation would have caused. Luckily my cousin's widow understood since she had dealt with the crazy sister for 67 years, and we still have a great relationship with her.

If he's a great guy then help him invest it where he'll actually get some good returns. Money being so cheap is an easy out for you.

Nope. What happens when you sell? Will he want any profit? What happens if you get divorced? (It happens).

Martin Cash said:

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Misleading title. He doesn't want to buy it, he wants to finance it.

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This. This thread is evidence that you should never take financial advice from the internet.

As many have said, absolutely not. If anything, put the mortgage in your name and just have your FIL pay you or something. I'd recommend just politely declining altogether though.

Unless he's charging close to 0 interest, your "compromise" sounds like a much better deal for you guys.

Sounds like your SIL couldn't get financing, so his help was necessary. Clearly you aren't in that boat.

"My wife really wants us to do it, but she knows my feelings on this. My compromise has always been that they are welcome to help out with the down payment, furniture, etc. I just have zero interest in paying my FIL every month."

Always get on the same page as your spouse and be consistent. I never mix family and money. We never borrow or take money from family members to buy stuff. If we can't afford something, then we just do not do it.

We will give family members money with no strings attached. It is stated when we give and we never bring it up again.

Family, money, and expectations is fraught with issues. Money/possessions are not worth ruining good relationships. Plus they will respect you that much more.

Playing devils advocate here but you would save some money on closing costs and potentially could get a better deal on the purchase of the house if it was cash. Not sure what market you are in, but this past summer in Austin I know a handful of people who borrowed family money to buy the house in cash and then later refinanced to pay them back. For people financing it was extremely difficult to be competitive when making offers in Austin, but I understand this market was somewhat of an anomaly.

But if you wouldn't get any better deal on paying cash for the house vs financing and then saving a few thousand on closing costs might not be worth it to go that route.

No. Don't. Do. It.

That is correct his house now.

I suppose I am in the minority here. I have mixed business with family multiple times with zero issues. In every case I was buying them the item or funding them money. Granted I wasn't buying them a house but it has involved several vehicles so there were still thousands of dollars involved. Expectations must be clear and upfront before any deal and there are certainly some family members I would never "assist."

Every situation is unique and it sounds to me like you FIL just wants to help so why not? The house would be in you and your wifes name so as long as you have a contract in place with him clearly defining the terms and monthly payments, why not?

hunterjr81 said:

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Every situation is unique and it sounds to me like you FIL just wants to help so why not? The house would be in you and your wifes name so as long as you have a contract in place with him clearly defining the terms and monthly payments, why not?

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The things us olds have learned is the correct answer is "it depends."

I also think OP should accept the offer to finance the house. You will be doing him a favor.

Like the FIL, I want my kids, and grandkids to live in safe neighborhoods and go to good schools and if I have to open the checkbook to make that happen-- then that's fine with me. I don't mind having an annuity from my kids paying me 3% at this point in my life.

Dang, all I got from my parents was a year of community college.

You say your FIL "wants to help us". Is there something in this that is helpful to you? Quicker process/lower closing cost/no appraisal/lower interest/etc.

If you qualify for a mortgage on your own, I'm just trying to understand what he's doing to help you.

I also don't understand the buy a house for you, then give it to you, then become a mortgage lender. Shouldn't you buy it with the cash he gives you as the mortgage lender? Doing it that way, assuming there are some benefits to borrowing from him, I wouldn't see anything wrong. But the optics of him buying it, giving it, lending money could lead to some "after all I did for you" scenario in the future.

On the other hand, if FIL is a CD investor and he's tired of getting less than 1% on his money... And he's offering a win-win by giving you a 2.5% 30 year . That could be a win win... So you combat any "after all I did for you" scenario with "after all I did for you" response, it can be a beneficial deal.

This

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Sounds like your SIL couldn't get financing, so his help was necessary.

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Dad may just be trying to be "fair" by offering his other daughter the same deal.

Thanks for all the replies. We settled on him giving us a loan to help out on the down payment on a house that was probably just out of our price range. My wife really wanted to take the help and she's been a trooper while I got my business up and running so I wanted to be fair to her.

At the end of the day my FIL wanted to help us get in a better home which I do appreciate. My goal will be to pay back the loan at an expedited rate so we don't have this hanging over us long term.

Sea Speed said:

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Dang, all I got from my parents was a year of community college.

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I just got their naturally high choloestrol.