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Building/remodeling a house and getting a Construction Loan. ......................... New York 483 posts
15th Feb '13

My husband and I are planning on buying a 150 year old farm house. It's in rough shape and the only loan we'd be able to buy it with and also take money to fix it up would be a construction loan. It's all fine and dandy, but we also need 20% down at closing, which would mean that we'd need about $20-25,000. My sister has money and we could ask her for a loan, but that is a large amount and I'd feel awkward asking. If it came down to it, we would ask though. So I say all this to ask these few questions:



1) If we ask her for a loan, we'd like to pay interest and also have a 5-6 year loan payoff time. So basically it would be no different than going to the bank, it's just that we would be able to pay her one lump sum each year rather than a monthly payment.



2) What is the going interest rate for a loan like this? Our mortgage interest rate is 3.5%, however, I don't know if the interest for a down payment loan would be different.



3) Can you even take out a loan for a down payment? I honestly, don't even have a clue.

user banned Due November 7 (boy); 1 child; Dayton, Ohio 26853 posts
15th Feb '13

She would have to "gift" you the money and provide proof to the bank that she has the funds. My parents lent me $3,000 and they had to provide the lender with all of their bank statements. It was kind of nuts.

K+A=C & B 2 kids; xxxxxx, xx, United States 2993 posts
15th Feb '13
Quoting .........................:" My husband and I are planning on buying a 150 year old farm house. It's in rough shape and the only loan ... [snip!] ... payment loan would be different. 3) Can you even take out a loan for a down payment? I honestly, don't even have a clue. "


Honestly, I would never borrow that kind of money from anyone (except a bank). I would save the money up on my own and then, apply for the loan. As far as taking out a loan for a down payment...I don't think you can do that. Taking a loan out for down payment takes away the entire reason why you need a down payment for the loan...I would think anyway. Again, this is just what I am assuming not what I know, lol Good luck though!

......................... New York 483 posts
15th Feb '13
Quoting Smartass *TTC*:" She would have to "gift" you the money and provide proof to the bank that she has the funds. My parents ... [snip!] ... the funds. My parents lent me $3,000 and they had to provide the lender with all of their bank statements. It was kind of nuts."


Is the max amount of a "gift" that someone gives you $10,000 before you would have to pay taxes on it? I guess that the thing that makes me uncomfortable is that she made about $450,000 last year and ended up having to pay $220,000 in taxes. I just don't want to take money that she is saving for taxes. KWIM?

......................... New York 483 posts
15th Feb '13
Quoting Chase and Brayden's mommy:" Honestly, I would never borrow that kind of money from anyone (except a bank). I would save the money ... [snip!] ... down payment for the loan...I would think anyway. Again, this is just what I am assuming not what I know, lol Good luck though!"


I know....that's what I was thinking. By taking out a loan from the bank to pay the bank, it's just a pointless gesture. They might as well just wave the 20% down payment and incorporate the payments into your mortgage.



The problem with saving for the 20% is that it would literally take us 5 years and we can't do that because we already have 3 kids in a tiny 900 square foot house with 2 bedroom. We also want more kids here in the next couple years. There's no way we could have 5 kids in this tiny house. There's always the possibility that we could buy another house, but there aren't any other houses in our price range that we really like. We want a place in the country and the place we're wanting has been the place we've wanted for 6 years...its literally just down the road from my parents and brother and also my two aunts and uncles. It's completely ideal for us. It's just the matter of getting the down payment.

user banned Due November 7 (boy); 1 child; Dayton, Ohio 26853 posts
15th Feb '13
Quoting .........................:" Is the max amount of a "gift" that someone gives you $10,000 before you would have to pay taxes on it? ... [snip!] ... last year and ended up having to pay $220,000 in taxes. I just don't want to take money that she is saving for taxes. KWIM? "

It may vary state to state, I googled and it looks like about 12k can be gifted tax free.

ILOVEWINE Due April 24; 2 kids; Sweden 10814 posts
15th Feb '13

You can get a rehab loan and only need 3.5% down. It's an FHA loan, and I believe you can use up to 50000 to fix the home along with your mortgage. There are stipulations though, like I has to have a floor, stove, and ability for water.



But I would never ask to borrow that much money from my sister, that's an unfair burden to put on her. Either save it yourself or buy something else.

user banned Due November 7 (boy); 1 child; Dayton, Ohio 26853 posts
15th Feb '13

If I had it, I would lend it to any of my siblings no problem. You know your sister and her financial situation. Talk to your bank and see what they suggest or how to go about it.

......................... New York 483 posts
15th Feb '13
Quoting ILOVEWINE:" You can get a rehab loan and only need 3.5% down. It's an FHA loan, and I believe you can use up to 50000 ... [snip!] ... to borrow that much money from my sister, that's an unfair burden to put on her. Either save it yourself or buy something else."


I'll check in on a rehab loan. It has all the credential you listed, but the pipes busted in the house so it would need new plumbing. It has water access though if that's all it needs.



I agree though about asking my sister. I'm sure she would and honestly wouldn't mind doing it, but I'd just feel bad. She loaned my brother $11,000 to purchase a foreclosure. He hasn't paid her back yet though. What they should have done was SHE should have bought it and funded the money to fix it up then he could have bought it from her for whatever she put into it. It would have been easier.