Author Topic: Anti-Mustachian MIL wants my husband to co-sign on loan for down-payment  (Read 3737 times)

ElizaStache

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Long story short: My husband's parents lost a shit load of money in the housing crash because they put all their eggs in one basket with buying too much house and then lost their jobs. They declared bankruptcy and just now have credit scores decent enough to qualify for a FHA loan. 4 years ago when I met him, he was buying his parents groceries and cat food. They took out a credit card in his name that they missed payments on, that still affects his credit today.

So their deal is that they are buying a new-construction house, and have put down their 1% in earnest money. They only need 3.5% down-payment for a house that will still be too big for their needs, but they put every last penny they had into the earnest money. They were counting on grandma to gift them the $5,000 they needed, but she's 89, her executor won't allow it. What MIL wants to do is get an interest-free loan from a faith-based organization and put that money into grandma's account and then have grandma sign it as a gift to them. MIL wants my husband and BIL to sign on this little loan. It's not credit based, won't show up on anyone's credit report, but we will still be liable if they default on the little loan. She's banking on bonuses FIL gets as a part of his compensation plan to make sure they can pay it back.

My husband calls me that his mom wants to do this, so I called her for more details because I am the financially literate one, as we say I wear "the pants with suspenders" in the relationship. I ask MIL all the questions he doesn't know to ask and find all this shit out. She didn't tell him about passing the loan off as grandma's money and not letting the mortgage loan people know about it. We are decidedly not signing this. She has my BIL roped in this, we want to call him to make sure he knows the facts of the situation without swaying his views one way or another.

We have been married for less than a year. I love his parents very much, I want to see them be successful, but they are not learning from their past mistakes. They hold a Parent Plus loan for my husband's education that we want to start helping out with. I know they won't have savings and will continue to ask for money when they inevitably need an electrician, something goes out, etc. She told me she might get one of her sisters to co-sign if we won't (which we aren't). They are banking on future paychecks to pay for moving costs, appliances, stuff like that.

This is a form of soft fraud, right? I don't want to be the new bitch in the family that ruins their dreams of homeownership. Lying on the application by omitting this little loan means they're not qualified for their loan, right? I just want to protect my family from their mistakes.

phred

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This is not a dream; it is a fantasy.  You are right -- don't do it

Linea_Norway

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Very good that you are not giving in. Amd good that you are taking the role of strict person if you DH isnot made for that role.

There is a long thread by PlayingWithFIRE UK who is in a situation with a husband who did sign for a loan of doom with his parents without her knowledge. Now they are in a serious situation. Please restrain your husband from doing things behind your back.
« Last Edit: April 15, 2018, 12:57:08 PM by Linda_Norway »

AlanStache

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ElizaStache

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Pretty much the second she asked him to co-sign he stopped her and told her he wouldn't do anything without talking to me, which she agreed with. I've drilled into him that we are not enabling them further other than help with the student loan, never co-sign for anything you're not willing to pay, and that friends and family screw you more than other people.

I think the worst part about all this I forgot to mention is that she's thinking of doing this loan program but hasn't even told her husband because he has anger issues and would blow up that grandma can't provide the funds without getting the little loan. Exactly why they're still leaning on their parents in their mid-late 50's is mind boggling to me and why DH and I are going to be FI probably before they even retire.

Roadrunner53

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From what I read I think you are smart to NOT get involved with this messed up money situation.

You say: They hold a Parent Plus loan for my husband's education that we want to start helping out with. I would suggest that you say NO to signing but tell them you are going to pay X amount of dollars a month and that will free them up for their budget.

Or is there anyway that you can pony up $2,500 and the BIL do the same? That way there is no messy money issues!

KBecks

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Oh my Lord.  This sounds terrible.  I think that in addition to not getting involved in this crazy lending scheme, you and your husband should also make sure that your credit is locked down hard so there is no way that the in-laws can commit identity theft on either of you.  Be very, very careful and keep your financial life and all details private. 

Best wishes.

ElizaStache

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From what I read I think you are smart to NOT get involved with this messed up money situation.

You say: They hold a Parent Plus loan for my husband's education that we want to start helping out with. I would suggest that you say NO to signing but tell them you are going to pay X amount of dollars a month and that will free them up for their budget.

Or is there anyway that you can pony up $2,500 and the BIL do the same? That way there is no messy money issues!

We keep our finances separate for now, and between us we could get $2,000 to gift to them, but I would really rather not as we both have debts to pay and it would essentially be our savings. BIL is 22/23 and is going to school full-time and only makes about $1,000/month from working part-time to cover his housing and basic needs. DH was thinking about contributing to their Parent Plus loan at the end of the year, but I'm going to try to get him to start sooner than that.

This all just sucks because we have lost trust in them and that we can't believe what they tell us anymore.

PoutineLover

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I don't think you should cosign anything for them, they've proven multiple times that they can't pay back their debts, even when someone else is on the hook too. However, if they are paying for a loan for your husband, you and your husband should take back that obligation and pay it. That way, they handle their stuff, you handle yours, and you can keep everything separate. They definitely should not be buying a house when they can't even get together the money to pay a tiny deposit, what do they think will happen when an emergency inevitably comes up? Disentangle your financial ties and let them handle their own messes.

Linea_Norway

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This is a good reason to say no: you still have your own debts to pay off and build up your own emergency fund. You cannot afford to support them financially.

Roadrunner53

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This all smells like a rotten fish! I don't like it and you are smart to steer clear.

Start paying the student loan and leave it be!

I know where you are coming from with these people. People I knew signed up for a freezer plan that included a freezer and they were questioned on how many steaks, roasts, chickens and so forth they ate a month. They got the freezer and the first food fill up. Well they thought they were living the life and were eating steaks for breakfast and gobbled up all the food in less than a month and it was supposed to last maybe two or more months. There are more stories than you can imagine. They never lost their house but I am sure they came close to it. They had their lights turned off often. Ran out of oil to heat their house often. On and on...I don't think they ever filled the freezer again! This was all on a payment plan too!

honeybbq

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From what I read I think you are smart to NOT get involved with this messed up money situation.

You say: They hold a Parent Plus loan for my husband's education that we want to start helping out with. I would suggest that you say NO to signing but tell them you are going to pay X amount of dollars a month and that will free them up for their budget.

Or is there anyway that you can pony up $2,500 and the BIL do the same? That way there is no messy money issues!

I agree that you two need to pay for this loan but do not do anything with the housing situation.

Kyle B

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Long story short: My husband's parents lost a shit load of money in the housing crash because they put all their eggs in one basket with buying too much house and then lost their jobs. They declared bankruptcy and just now have credit scores decent enough to qualify for a FHA loan. 4 years ago when I met him, he was buying his parents groceries and cat food. They took out a credit card in his name that they missed payments on, that still affects his credit today.

So their deal is that they are buying a new-construction house, and have put down their 1% in earnest money. They only need 3.5% down-payment for a house that will still be too big for their needs, but they put every last penny they had into the earnest money. They were counting on grandma to gift them the $5,000 they needed, but she's 89, her executor won't allow it. What MIL wants to do is get an interest-free loan from a faith-based organization and put that money into grandma's account and then have grandma sign it as a gift to them. MIL wants my husband and BIL to sign on this little loan. It's not credit based, won't show up on anyone's credit report, but we will still be liable if they default on the little loan. She's banking on bonuses FIL gets as a part of his compensation plan to make sure they can pay it back.

My husband calls me that his mom wants to do this, so I called her for more details because I am the financially literate one, as we say I wear "the pants with suspenders" in the relationship. I ask MIL all the questions he doesn't know to ask and find all this shit out. She didn't tell him about passing the loan off as grandma's money and not letting the mortgage loan people know about it. We are decidedly not signing this. She has my BIL roped in this, we want to call him to make sure he knows the facts of the situation without swaying his views one way or another.

We have been married for less than a year. I love his parents very much, I want to see them be successful, but they are not learning from their past mistakes. They hold a Parent Plus loan for my husband's education that we want to start helping out with. I know they won't have savings and will continue to ask for money when they inevitably need an electrician, something goes out, etc. She told me she might get one of her sisters to co-sign if we won't (which we aren't). They are banking on future paychecks to pay for moving costs, appliances, stuff like that.

This is a form of soft fraud, right? I don't want to be the new bitch in the family that ruins their dreams of homeownership. Lying on the application by omitting this little loan means they're not qualified for their loan, right? I just want to protect my family from their mistakes.

How is this fraud "soft"?  They're trying to involve you in a scheme where they lie to a mortgage provider to secure a loan. Isn't that a felony? If you participate knowing in advance of the crime they're intending to commit, aren't you committing felony conspiracy?

And if grandma already has an executor, doesn't that mean she no longer can legally consent? No wonder the executor won't agree! I'm not an attorney, but grandma's signature notwithstanding, wouldn't that loan would be a fraud as well? Both of the lender, and of grandma?

Your assurances about "love" and not wanting to be the "new bitch in the family" are co-dependent in the extreme. If I'm not mistaken, if this goes sideways (and it sounds like everything these losers do goes sideways), you could wind up in prison.

Honestly, if my spouse were pressuring me to sign on to behavior like this, I'd be shopping divorce attorneys. This crew is going to wreck your life.
« Last Edit: April 05, 2018, 01:07:50 PM by Kyle B »

ElizaStache

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Long story short: My husband's parents lost a shit load of money in the housing crash because they put all their eggs in one basket with buying too much house and then lost their jobs. They declared bankruptcy and just now have credit scores decent enough to qualify for a FHA loan. 4 years ago when I met him, he was buying his parents groceries and cat food. They took out a credit card in his name that they missed payments on, that still affects his credit today.

So their deal is that they are buying a new-construction house, and have put down their 1% in earnest money. They only need 3.5% down-payment for a house that will still be too big for their needs, but they put every last penny they had into the earnest money. They were counting on grandma to gift them the $5,000 they needed, but she's 89, her executor won't allow it. What MIL wants to do is get an interest-free loan from a faith-based organization and put that money into grandma's account and then have grandma sign it as a gift to them. MIL wants my husband and BIL to sign on this little loan. It's not credit based, won't show up on anyone's credit report, but we will still be liable if they default on the little loan. She's banking on bonuses FIL gets as a part of his compensation plan to make sure they can pay it back.

My husband calls me that his mom wants to do this, so I called her for more details because I am the financially literate one, as we say I wear "the pants with suspenders" in the relationship. I ask MIL all the questions he doesn't know to ask and find all this shit out. She didn't tell him about passing the loan off as grandma's money and not letting the mortgage loan people know about it. We are decidedly not signing this. She has my BIL roped in this, we want to call him to make sure he knows the facts of the situation without swaying his views one way or another.

We have been married for less than a year. I love his parents very much, I want to see them be successful, but they are not learning from their past mistakes. They hold a Parent Plus loan for my husband's education that we want to start helping out with. I know they won't have savings and will continue to ask for money when they inevitably need an electrician, something goes out, etc. She told me she might get one of her sisters to co-sign if we won't (which we aren't). They are banking on future paychecks to pay for moving costs, appliances, stuff like that.

This is a form of soft fraud, right? I don't want to be the new bitch in the family that ruins their dreams of homeownership. Lying on the application by omitting this little loan means they're not qualified for their loan, right? I just want to protect my family from their mistakes.

How is this fraud "soft"?  They're trying to involve you in a scheme where they lie to a mortgage provider to secure a loan. Isn't that a felony? If you participate knowing in advance of the crime they're intending to commit, aren't you committing felony conspiracy?

And if grandma already has an executor, doesn't that mean she no longer can legally consent? No wonder the executor won't agree! I'm not an attorney, but grandma's signature notwithstanding, wouldn't that loan would be a fraud as well? Both of the lender, and of grandma?

Your assurances about "love" and not wanting to be the "new bitch in the family" are co-dependent in the extreme. If I'm not mistaken, if this goes sideways (and it sounds like everything these losers do goes sideways), you could wind up in prison.

Honestly, if my spouse were pressuring me to sign on to behavior like this, I'd be shopping divorce attorneys.

I asked my dad who was a bank manager for many years, it's considered fraud for sure and is punishable up to $1M in fines and 30 years in prison. If this were us gifting them money and then them paying back it would be different, but since it's through another organization and they're laundering the money through grandma, it's for sure fraud. This is why I also want to warn my BIL so he sees the whole picture so he doesn't get wrapped up in this.

I might not have made it super clear that the second I got those details from MIL and told my husband what she was attempting to do was considered fraud, he noped out immediately. We are not taking part in this at all, I just posted to make sure I saw this correctly. I was never going to sign on this in the first place, and he was never pressuring me to let him do it. If he were wanting to do it anyway then we'd have a bigger problem.

When I bought my house I got a small gift from my grandma (legit gift, not this bullshit MIL is doing), my dad is her executor and I know they both signed off on the gift statement. Since his grandma is in AZ and my parents/grandma are in CA, I'm not sure if there's legally anything different.

As far as not wanting to be "the new bitch in the family", this is a relationships issue that I don't want to have hanging over my head. I've already had to urge DH to "cut the cord" with him mom and shut her down on talks about grandkids because that kind of thing is not her business. I'm letting him lead on the conversation with his family so it's not "ElizaStache told me to" situation. After our phone call with her tonight we are letting her know this is the last time we'll address this issue, we wish them the best of luck finding the money to make their poor decisions but we will not take part. We need to do protect our little family unit and not let it be consumed because they hatched him.

trollwithamustache

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This is not a fun situation because although as others have pointed out its considered fraud, I know many people who have done cash move shenanigans like this to buy a house and do not consider it fraud.

so, you our internet sympathies.

frugaliknowit

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Taking part in this scheme is NOT HELPING anyone.  Anyone (especially at their age) that cannot come up with a freagin FHA downpayment (which is like-ah-SQUAT!) has no business owning a home.  PERIOD.  You guys would end up cleaning up MORE of their freagin POOP!

jlcnuke

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Sounds like fraud AND a good way to have his parents default on the "loan" while making him (and thus you) responsible for their continued financial mistakes. I'd tell them that if they need to commit fraud like this to "get" the house then they can't afford it and I'm not going to risk my financial security to support their over-spending.

If you want to be "PC" about it, then decline with "we've decided that we would rather not mix family and finances going forward as it could result in significant hard-feelings if something unfortunate were to happen in the future but wish you the best of luck".

ElizaStache

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So all's well that ends well... for now.
We called BIL first last night to make sure he understood the situation in full. He was given a slightly different story than us, which is not too surprising. He was defensive and like his dad has anger issues and needed to call him mom right away to calm down. He told us he'd call us back or try to set up a 3 way call with mom. We had asked him to not tell her our position yet. He didn't end up doing that, so we called MIL. She was pretty much talked out, but was scrapping the small loan idea entirely, because she claims she wasn't thinking clearly.

She claims it was not her intention to commit fraud, once we busted out the "felony" word, she just shut it all down and told us not to worry about co-signing anything. I'm just glad I was able to pry more into this situation and save my DH and BIL's future asses when this inevitably falls apart. They still want the house and are going to get the $5k somewhere, but not from us or this organization. She wants to talk more on Sunday, which I'm guessing will be the student loan, which we intend on bringing up first. Even though it's in their name and is their liability, we want to be nice and take it on. It's another $12k for us to pay off, and we know they have probably only paid minimum on it for the past 2 years.

A bullet dodged.

KBecks

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This may sound obvious, but make sure you are getting statements on the Parent Plus loan and that you are sending payments directly to the lender. Perhaps get the whole thing reassigned to your husband directly. Good luck.

robartsd

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Although I would feel a little sorry for them because of the housing crash loss the experienced, I was 100% of the opinion that you should let them lay in the bed they made until the parent plus loan came into the picture. If you are able, I would offer to take over the parent plus loan right away. I'm sure sunk cost fallacy will prevent them from being convinced that they should back out of this new-construction house - I might consider promising to cover the sunk cost loss if they backed out of this house in order to actually save for a down payment they could afford. I'd be blunt about your concerns that they are overextending themselves and you don't plan to have the resources to bail them out.

AlanStache

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...I'm sure sunk cost fallacy will prevent them from being convinced that they should back out of this new-construction house - I might consider promising to cover the sunk cost loss if they backed out of this house in order to actually save for a down payment they could afford. I'd be blunt about your concerns that they are overextending themselves and you don't plan to have the resources to bail them out.

This could go well or very badly.  If the parents accept and back out you will get some but not the major thanks you deserve.  If they go forward and get into trouble they will still ask for help and now you have shown your hand to have 2k$ you could 'give'/'loan' them.  And saying "we offed to get you out of the house x years ago before you bought" wont go over well.  If human were more logical this would be a better strategy.

Aegishjalmur

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Long story short: My husband's parents lost a shit load of money in the housing crash because they put all their eggs in one basket with buying too much house and then lost their jobs. They declared bankruptcy and just now have credit scores decent enough to qualify for a FHA loan. 4 years ago when I met him, he was buying his parents groceries and cat food. They took out a credit card in his name that they missed payments on, that still affects his credit today.

So their deal is that they are buying a new-construction house, and have put down their 1% in earnest money. They only need 3.5% down-payment for a house that will still be too big for their needs, but they put every last penny they had into the earnest money. They were counting on grandma to gift them the $5,000 they needed, but she's 89, her executor won't allow it. What MIL wants to do is get an interest-free loan from a faith-based organization and put that money into grandma's account and then have grandma sign it as a gift to them. MIL wants my husband and BIL to sign on this little loan. It's not credit based, won't show up on anyone's credit report, but we will still be liable if they default on the little loan. She's banking on bonuses FIL gets as a part of his compensation plan to make sure they can pay it back.

My husband calls me that his mom wants to do this, so I called her for more details because I am the financially literate one, as we say I wear "the pants with suspenders" in the relationship. I ask MIL all the questions he doesn't know to ask and find all this shit out. She didn't tell him about passing the loan off as grandma's money and not letting the mortgage loan people know about it. We are decidedly not signing this. She has my BIL roped in this, we want to call him to make sure he knows the facts of the situation without swaying his views one way or another.

We have been married for less than a year. I love his parents very much, I want to see them be successful, but they are not learning from their past mistakes. They hold a Parent Plus loan for my husband's education that we want to start helping out with. I know they won't have savings and will continue to ask for money when they inevitably need an electrician, something goes out, etc. She told me she might get one of her sisters to co-sign if we won't (which we aren't). They are banking on future paychecks to pay for moving costs, appliances, stuff like that.

This is a form of soft fraud, right? I don't want to be the new bitch in the family that ruins their dreams of homeownership. Lying on the application by omitting this little loan means they're not qualified for their loan, right? I just want to protect my family from their mistakes.

It's fraud, plain and simple. They are lying to get a federally backed mortgage. If the lender finds out after it closes, they can call the loan due in full immediately. Fha can also put them on the LDP/GSA lists that lenders are required to review which would bar them from getting any other Federal loans.

They are likely to get caught before the loan closes as for mortgage loans they have specific docs to get for gifts that require the evidence of transfer from the gift givers acct and receipt into the borrowers acct. Also, your DH's grandmother is required to sign a gift letter stating she gave $x in funds from what acct, so unless grandmother is willing to lie that will put a stop to that.

I was a Mortgage UW and Loan Processor so believe me when I say that unless the lender is seriously fly by night and doesn't do their due diligence, this will be caught.

Also, if the closing was delayed because they did not have the funds and closing needs to be pushed out, depending on how there purchase contract is worded, the builder could cancel the contract, put the house back on the market for sale, and keep your in-laws earnest money.
« Last Edit: April 06, 2018, 02:35:15 PM by Aegishjalmur »

kite

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Parent Plus loan for his education?
He should pay that off for them. 

BikeFanatic

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Quote
I don't think you should cosign anything for them, they've proven multiple times that they can't pay back their debts, even when someone else is on the hook too. However, if they are paying for a loan for your husband, you and your husband should take back that obligation and pay it. That way, they handle their stuff, you handle yours, and you can keep everything separate.

+1

I do agree your husband should pay the loan. I know when I bought a house using a govt protected loan, I was allowed bythe terms to get a gift from a family member to help pay. Perhaps they can look into that. Maybe if you are in an OK position you would feel generous to make a small gift for the downpayment like repaying some of DH education expenses.
Certainly do not sign anything, especially anything that could be fraudulent! Let them know that is a huge ask.
 

Sibley

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OP - you MAY be able to refinance that Plus loan into your husband's name, which would allow you to deduct the student loan interest. If it's not in his name, even if he pays it, he can't.

Check with your favorite non-governmental refi company (SoFi, etc) to see if you can. I tried to do it with my parent's loan for me, but wasn't able to b/c they had already refi'ed it to SoFi. I had to get the login info for the account so I could set up payments from my account, but putting it into my name would have been so much easier.

And definitely lock down your credit, just in case. Your inlaws may not be malicious, but stupidity can be just as dangerous sometimes.

robartsd

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OP - you MAY be able to refinance that Plus loan into your husband's name, which would allow you to deduct the student loan interest. If it's not in his name, even if he pays it, he can't.
That's a good point. And having it refinanced in your husband's name would also get it out of their debt-to-income ratio which may help them qualify for better terms.

ElizaStache

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This may sound obvious, but make sure you are getting statements on the Parent Plus loan and that you are sending payments directly to the lender. Perhaps get the whole thing reassigned to your husband directly. Good luck.
This was the plan of action before I saw...

OP - you MAY be able to refinance that Plus loan into your husband's name, which would allow you to deduct the student loan interest. If it's not in his name, even if he pays it, he can't.
I think it's worth a shot to try to refinance it to his name. I might need to be on there because his credit isn't great (mid 600's).

Although I would feel a little sorry for them because of the housing crash loss the experienced, I was 100% of the opinion that you should let them lay in the bed they made until the parent plus loan came into the picture. If you are able, I would offer to take over the parent plus loan right away. I'm sure sunk cost fallacy will prevent them from being convinced that they should back out of this new-construction house - I might consider promising to cover the sunk cost loss if they backed out of this house in order to actually save for a down payment they could afford. I'd be blunt about your concerns that they are overextending themselves and you don't plan to have the resources to bail them out.
I'd feel sorry for them if a lot of the problem wasn't them buying huge TV's (brand new one had a few pixels out, so FIL gave that to MIL and bought himself another TV), anything the boys wanted, expensive nights out, etc. and overall goofy spending to keep up with the Joneses and that they were once rich and have the debt to prove it. We're going to offer to take the student loan for sure, hopefully it will help their DTI ratio, I'm not sure exactly when they're closing, but we can see about refinancing. Either way, we will pay it directly through the website/statements and not give them any money.
I'd love to help with getting their earnest money back, but it won't be realistic for us to over-extend ourselves, since I'm the one with the money to do that.

Thank you everyone for the insight, it's much appreciated.