Borrow Money from Friends and Family to Purchase a Home, Yes or No?

You're tired of the noisy kids upstairs waking you up in the middle of the night. The college kids next door blasting music all hours of the night have finally gotten on your last nerve. And you're tired of bruising your knee in the small bedroom you and your boyfriend share. Maybe you're getting ready for a new baby. Whatever the reason, you've had it up to here with living in an apartment or a condo and want your own home, but you can't afford to get one on your own salary. So should you borrow money from friends and family?

According to Merriam Webster, the definition of borrow is "to receive with the implied or expressed intention of returning the same or an equivalent."

Tip One: Do not ask to "borrow" money if you have no intention or no reasonable way to pack it back.

After you've decided to ask your friends or family for money to buy a home, do you have a plan on how long it will take to pay them back? If that friend or family member thinks you're going to pay them back a month from now as opposed to a few years from now, you're in for one huge argument.

Tip Two: Explain in writing how long it will take to pay your friend or family member back. The reason it's necessary to get it in writing is so there's no room for miscommunication later. If your friend or family member ends up taking you to court for repayment-yes, it can go that far if that person ends up being behind on bills because you're not paying the loan back on time-you have to have some tangible document detailing how much time and how much money was supposed to be distributed.

Make sure to estimate reasonable payments. If you know you have to pay a mortgage, an electricity bill, cell and house phone bills, tuition or day care rates, grocery expenses and a heat bill, include those amounts in your daily expenses. Suggesting payments for huge lump sums without including your own living expenses will leave you explaining why you're short on payments every month. When you give your friend or family member this information, make sure that that person can afford to have payments made in your estimated timeframe.

Tip Three: Make sure your family member or friend understands that there is no room for flexibility in this payment. If you pay more one month and less the next month because you got a bonus at work or won the lottery or somebody paid you back, that still does not change the loan payments.

Another sticky situation is if you do run into some extra money and splurge on things that your family member or friend thinks are unimportant. If you're buying your kid new Jordan gym shoes or buying a fur coat for some party coming up but you're giving the loaner minimum payment amounts, you're going to have to deal with hostile looks. That family member or friend may be watching what you spend your money on. Does the loaner have a right to? As long as you owe this person money, the topic may come up regardless of the payments you agreed on.

Tip Four: Take into consideration that this person loaned you money with the intention of getting it back. Try to hold off on splurging your money on "wants" and take care of "needs" instead until the money is paid back.

Money can break up a friendship and separate a family. Unless you're truly ready to have a monetary relationship with this family member or friend, think very carefully about this decision. You might be better off with a bank negotiation or saving up.