Dad paying for my new home in cash. How can I buy the house from him?
You are going to need a lawyer anyway so check with him.   But here is a path you might be able to go down.   Put the house in your name right from the get go.  He gives you the money but you sign over a promissory note to him so that you net less than $14000 (gift tax annual exclusion for the calendar year). He can gift everyone in your household 14k per year tax free and he could gift it to you and your partner in less than 7 years.  You can pay him back in anyway you like or not at all as the promissory note could be reduced by 28k per year. I think a CPA and lawyer in your state would be able to confirm that this would work for you. You have four basic options. Presumably this house is a great deal for you for some reason if you are willing to go to great lengths such as these to acquire it. I suggest you have your father purchase the house with cash, then you purchase the house from him. You might want to discuss this with the title company, it's possible that there are some fees that they will waive if you close both sales through them in a short period of time. If the home will appraise for a higher amount than purchase, then you may be able to get a mortgage without a significant down-payment. If not, then you will need to owe your father at least the amount of the down-payment at closing time. we have little money in cash for a down-payment This is a red flag to me. If you have little money in cash for a down-payment, how are you supposed to be a landlord too?  You could try is to do a lease to own from your Dad. Get a renter into the other home for at least a year or more and then close on the house once your financial situation improves. You still have the same problem of being a landlord. Another option is to receive a gift letter from your Dad since he is gifting the money on the home. It might extend your closing a little bit so you can get an appraisal done and loan application. This to me is the most sane option. "There are quite some options, but without additional information, I can only provide examples. Last year I had the option to buy a house, but I decided against it because in my area it is getting harder and harder every year to sell it at a reasonable price. But if I had bought a house, my mother would have lent me the money, with me paying it back to her over the years on 3% interest. So it would have been some kind of a private loan. But my mom would never have taken ownership of the house, since it was not her intention to own it in any way. (Does your dad intend to own the house and rent it to you? If yes, and if you are comfortable with renting instead of buying, then this is an option.) The second option, the one we discarded because of the additional cost, is that I could have taken a loan, paying 4.5% interest to the bank, which would then pay under 1% to my mom, and keep the rest. Banks always want to make profit, and this profit has to come from somewhere - from the difference between the interest rates. If your dad has 230k on the bank, and you owe 230k to the bank, you are better off if you keep the bank out - at least as long as your dad is comfortable with lending you money, and you are comfortable with owing him money. (my gf would never borough money from her mother, because her mother would always play the ""you are in my debt"" card - on each and every visit, and whenever she needed help in any way...) So the key is: What does your dad feel comfy with - and what do you feel comfy with. If possible, keep the banks out, but set up a written contract between you and your dad."
"As the answer above states, future inflation mitigates ""unwise"" for a longer term mortgage, at least in financial-only terms.  But consider that, if you lose your ability to make payments for long enough time ANYTIME during term, the lending institution has a right to repossess, leaving you with NOTHING or worse for all the maintenance you've had to do.  You can never know, but eleven years into my mortgage, I lost enough of my income for just long enough time to have to sell for just enough to pay the remainder of the mortgage and walk away with empty pockets.   To help clarify understanding even better, contrast the 30-yr mortgage with the other extreme: save up and own from day one.  When I did the math a few years ago, buying with a 30-year mortgage would cost cumulatively almost 3 times the real house value in mortgage payments with never the freedom to suspend payments when I might need to.  Being a freedom-loving American, I determined to buy a house with cash.  DON'T FORGET that mortgageable properties are over-priced just because buyers less wise than you are so willing to borrow to buy them, so I decided to buy some fixer-upper that no bank would lend on.  I found such a fixer-upper, paid cash, never have to worry about repossession by a lender, can continue to save up for my dream home which I'll own a lot sooner, and will have a nice increase in house value while I fix it up to help get me there, and NO INSURANCE PAYMENTS to some insurer who'll tell me what I can't do with MY property. Let the next buyer of your fixed-up, paid-off house pay YOU the over-priced amount they are willing to pay just because THEY can get that 30-year mortgage, and you enjoy the freedom to dream and adjust your budget to the needs of the moment and end up with a house in 30 years (15, more realistically) that is 2.5 times more valuable.  And keep from fighting with your spouse over finances in the meantime." "Given the state of the economy, and the potential of a rough near future for us recent grads (i.e. on/off work), I would recommend holding off on large purchases while your life is in flux.  This includes both a NEW car and purchasing a house. My short answer is: you need a reliable vehicle, so purchase a used car, from a major dealer (yes this will add a fairly high premium, but easier financing), that is 4-5 years old, or more.  Barring the major dealer purchase, be sure to get a mechanic to check out a vehicle, many will offer this service for a reasonable payment.  As people point out, cars these days will run for another 100k miles.  You will NOT have to pay anywhere near $27,000 for this vehicle.  You may need to leverage your 10k for a loan if you choose to finance, but it should not be a problem, especially as you seem to imply an established credit history. In addition to this, start saving your money for the house you would like to eventually get.  We have no idea where you live, but, picking rough numbers, assuming a 2 year buy period, 20% down, and a $250,000 home, the down payment alone will require you to save ~$2,000/month starting now. Barring either of these options, max out your money to tax sheltered accounts (your Roth IRA, work 401k, or a regular IRA) asap.  Obviously, do not deplete your emergency fund, if anything, increase it.  10k can be burned through in a heartbeat. Long Answer:  I purchased a brand new car, right out of school, at a reasonable interest rate.  Like you, I can afford this vehicle, however, if someone were to come to me today (3.5 years later) and offer me the opportunity to take it back and purchase a 4-5 year used vehicle, at a 4-5 year used car price, albeit at a much higher interest rate (since I financed), it would be about a 0.02 second decision. I like my car, but, I'd like the differential cash savings between it and a reliable used car more.  $27,000 is also fairly expensive for a new vehicle, there are many, very nice vehicles, for 21-23k.  I still would not consider these priced appropriate to spend your money on them, but they exist.  However, you do very much need a reliable vehicle, and I think you should get one. On the home front, your $400 all inclusive rent is insanely cheap.  Many people spend more than that on property tax and PMI each year, so anyone who throws the ""You're throwing money away!"" line at you is blowing smoke to justify their own home purchase.  Take the money you would have spent on a mortgage, and squirrel it away.  Do your own due diligence and research the home market in your area and decide for yourself if you think home prices have bottomed and will stay there, have further to go, or are going to begin to rise.  That is a decision only you can make for yourself. I'd add a section about getting expenses under control, but you said you could save 50% of your takehome pay.  This is an order of magnitude above the average.  Good job.  Try doing 50% for 4 months, then calculate your actual amount.  Then try to beat it." "Fundamentals:  Then remember that you want to put 20% or more down in cash, to avoid PMI, and recalculate with thatmajor chunk taken out of your savings.  Many banks offer calculators on their websites that can help you run these numbers and figure out how much house a given mortgage can pay for. Remember that the old advice that you should buy the largest house you can afford, or the newer advice about ""starter homes"", are both questionable in the current market. =========================== Added:  If you're willing to settle for a rule-of-thumb first-approximation ballpark estimate: Maximum mortgage payment: Rule of 28. Your monthly mortgage payment should not exceed 28 percent of your gross monthly income (your income before taxes are taken out).  Maximum housing cost: Rule of 32. Your total housing payments (including the mortgage, homeowner’s insurance, and private mortgage insurance [PMI], association fees, and property taxes) should not exceed 32 percent of your gross monthly income. Maximum Total Debt Service: Rule of 40. Your total debt payments, including your housing payment, your auto loan or student loan payments, and minimum credit card payments should not exceed 40 percent of your gross monthly income. As I said, many banks offer web-based tools that will run these numbers for you. These are rules that the lending industy uses for a quick initial screen of an application. They do not guarantee that you in particular can afford that large a loan, just that it isn't so bad that they won't even look at it. Note that this is all in terms of mortgage paymennts, which means it's also affected by what interest rate you can get, how long a mortgage you're willing to take, and how much you can afford to pull out of your savings. Also, as noted, if you can't put 20% down from savings the bank will hit you for PMI. Standard reminder: Unless you explect to live in the same place for five years or more, buying a house is questionable financially. There is nothing wrong with renting; depending on local housing stock it may be cheaper. Houses come with ongoung costs and hassles rental -- even renting a house -- doesn't. Buy a house only when it makes sense both financially and in terms of what you actually need to make your life pleasant. Do not buy a house only because you think it's an investment; real estate can be a profitable business, but thinking of a house as simultaneously both your home and an investment is a good way to get yourself into trouble." "Its best to seek a lawyer, but it is unlikely you can force him to pay.  You probably know couples, that are in some part of the divorce process, that have trouble obtaining court ordered payments.  In your case you have less of a legal standing (exception: if you have children together).  As far as the house goes, the two of you entered into some sort of business arrangement and it will be difficult to ""force"" him to pay.   One thing that works for you is that he has excellent credit.  If he is interested in keeping a high credit rating he will ensure that no payments are late on the home.  Your question suggests that the two of you are not getting along very well right now, and that needs to stop.  The best financial decision you can make right now is to get along with him.   It seems that the two of you have not officially broken up.  If you do decide to depart ways, do so as amicably as possible.  You will have to work to get the home in your name only, and him off the deed.  This benefits both of you as you will have sole control of the house and this ill advised business decision can end.  He will have the home off his credit and will not be responsible if you miss a payment and can also buy a home or whatever of his own. Good luck and do your best to work this out.  Seeking peace will cost you a lot less money in the long run.  Fighting in court cost a lot of money.  Giving in to semi-reasonable demands are far cheaper then fighting. Here is an example.  Lets say he normally contributes $500 to the mortgage, and he decides to move out.  I would ask him to contribute $200 until you can get his name off the loan, say 6 months at the most.  After that you will put the house up for sale if you cannot obtain a mortgage in your own name and will split any profits." This is a case where you sit down with an advisor or two. There are legal, and tax issues.  When you deposit the cash, or buy a car with it, the large cash transaction will trigger a notice to the US Government. So they will eventually find out.  Before you get to that point you need to know what obligations and consequences you will be facing. Because you don't know if it was a gift, or found money, or if the owner will be back looking for you to return it; therefore you need expert advice. Firstly, there is also a lifetime gift+estate tax allowance. If the father's estate, including other gifts given in his lifetime, is unlikely to exceed that allowance, it might be simplest simply to give the whole amount now and count it against the allowance. Right now the allowance is $5.34M, but that seems quite a big political football and it's the allowance when you die that matters. Looking back at past values for the allowance, $1M seems like a pretty safe amount to bet on. If you want to avoid/minimize the use of that allowance, I would make a loan structured as a mortgage that will have $14K payments each year (which can then be forgiven). The points in Rick Goldstein's answer about an appropriate rate, and being able to give more if more notional donors and recipients can be used, also apply. So for example in the first year hand over $200K at 3.5% and immediately forgive $14K. The next year, forgive the interest charge of $6.5K and capital of $7.5K. Given the age of the daughter, I guess the father might well die before its all paid off that way, leaving some residue to be forgiven by the estate (and thus potentially incurring estate taxes). There might also be state gift/estate taxes to consider. Edited to reflect 2014 gift and lifetime exclusion limits. "Your actual question is a bit confusing, but parts of it are answerable. If your parents give you cash to buy a home, you use it for a cash sale, and you then repay them, then if they don't charge you interest (above and beyond any they may pay - treat their loan as entirely separate from yours.) that amount of not-charged interest is considered a gift.  You can look up these rates here, on the IRS website, called ""Applicable Federal Rates""; currently it's around 2.30% APR.  If the interest is that much, the interest isn't a gift, but part of a loan - though your parents will have to file some paperwork and you will also.  Search for more information about ""Intra-Family Loans"" for full details - and talk to a real estate lawyer. Separately, if your parents are the primary/only signors on the mortgage, and are thus effectively the property owner, there are two separate issues.  First, you're welcome to pay off the mortgage while you live there, and no tax issues exist (then) in terms of gift, though it's still owned in your parents' name - so you don't get the house, they'd have to gift that to you separately, though they can do that in stages to avoid gift tax ($14k worth of equity per year, or whatever the current year's annual limit is, per parent and per you/wife if applicable). H&R Block discusses the concept of Equitable Ownership, which determines who is able to take the property tax and mortgage interest deductions on the house.  Tax Almanac goes into a bit more detail on the subject.  Ultimately, another issue for a real estate attorney probably (or at least a CPA or tax attorney): you need to be very careful if you're going to try and get the tax deductions (which would be probably far more than the savings of a half percent of interest rate or whatnot).   In general, there are a lot of options for exactly how you structure the purchase, payments, and equity, and you should talk to a professional to find out exactly the right way to structure it.   This mortgage info site has some good tips for several different ways to structure things, just as an example. I would in particular suggest you pay attention to deductability of mortgage interest and property taxes, as those two can be a huge amount of tax savings and you can lose that very easily if you're not careful." Your only option might be finding a seller-financed property with a motivated seller who is willing to take the risk of loaning you money. However, be prepared to pay a hefty rate on that loan if you can even pull it off.