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Message
re: Question about using fiancée's income when buying a home
Posted on 9/7/13 at 10:56 pm to pottymouth
Posted on 9/7/13 at 10:56 pm to pottymouth
quote:
Well, I've done it grossing 60. Heck, I could probably do it grossing 50. You have to decide if you want to build real wealth and be truly comfortable or are you gonna do what all the other broke people do and just get by.
You saved 30k grossing 60k? I just don't see how that is possible unless you had no rent or utilities. I gross 50, and my take home pay is 1340. That's 35k take home. I'd love to know how you think you can live off 5k a year. Not trying to be a sarcastic person, but that's ridiculous.
quote:
Dave Ramsey can be a dbag, but his "live like no one else..." platitude is pretty spot on. That and don't take money advice from broke people. And the borrower is the slave to the lender.
I'm. Not a huge fan of this philosophy. Rent is basically borrowing, except you get none of the equity.
quote:
Over all, it sounds like you two are going to have good jobs and steadily increasing incomes, so if anything does go awry, you can work your way out of it. Best of luck with the wedding and in your new life together!
Hopefully this is the case.
2
Posted on 9/8/13 at 12:26 am to LNCHBOX
quote:
You saved 30k grossing 60k? I just don't see how that is possible unless you had no rent or utilities. I gross 50, and my take home pay is 1340. That's 35k take home. I'd love to know how you think you can live off 5k a year. Not trying to be a sarcastic person, but that's ridiculous.
Take home was $4400/month, including untaxed expense reimbursement and car allowance.
Didn't have more taxes withheld than what was owed, so no refund. Got that money in the paycheck when I needed it. No reason to give an interest free loan to Uncle Sam. Go to the withholding calc on irs.gov to figure yours out.
Employee portion of medical coverage was a lot less than it is now, unfortunately. Not much you can do about that until exchanges become available and you can shop around.
Education credit and/or student loan interest deduction. Or your employer pays for continuing education.
Side business has lots of deductions. Do some consulting so that you can write off portion of home office, phone, car use, etc. Must show a profit at least two years out of five. Prepare own taxes.
Token amount into the 401k temporarily. Having a healthy savings account is worth the pause in investing so you don't have to take out a loan on your 401k or, worse, a signature loan at 10%+ for an emergency. Then bumped it up to 15% plus max out a Roth every year.
Belong to a credit union with no fees, better CD rates.
No car notes. Luckily didn't need tires or repairs that year. High deductible insurance, like $1000, but full coverage. Same on the house.
No cable, free movies from the library, no smartphone data plan (shoot, we may only have had one mobile at the time), a/c set at 80, heat at 67. Date nights on birthdays and anniversary only. Eat at home, plan meals, mostly vegetarian. Bargains at the farmers market.
Might have had a ymca membership at that time, but riding a bike or walking the dog is free.
No vacations, just long weekend trips. You can take a good vacation when you have cash saved for one.
The biggest factor was a $650 payment on the 30 year fixed mortgage. Add in the mortgage interest deduction, and we were able to do it.
THAT is why we tell you not to buy too much house to start. Sacrifice a little in the beginning, invest some sweat equity since you are handy, and you will come out ahead in the long run. I will have paid off my second house, bought for double what the first one cost, 18 years after buying that first one.
Crazy like a fox.
Posted on 9/8/13 at 12:37 am to LNCHBOX
quote:
Rent is basically borrowing, except you get none of the equity.
One more thing. Rent puts a roof over your head at night so that you can be a productive citizen during the day. It is not wasted money. There are certainly circumstances when it makes more sense than buying.
Posted on 9/8/13 at 7:19 am to pottymouth
quote:
Take home was $4400/month
Well that not's really gross now is it? You're take home was $53k. So you're gross had to be higher than $60k.
quote:
Employee portion of medical coverage was a lot less than it is now, unfortunately. Not much you can do about that until exchanges become available and you can shop around.
Mine is cheap enough for good coverage.
quote:
Education credit and/or student loan interest deduction. Or your employer pays for continuing education.
Really, interest deductions? This is like a drop in the bucket. (although of course I take them)
quote:
Side business has lots of deductions. Do some consulting so that you can write off portion of home office, phone, car use, etc. Must show a profit at least two years out of five.
Don't really feel like using my free time from work for that.
quote:
Prepare own taxes
Already don't pay for that (BIL accountant, not to mention that saves me less than $100).
quote:
Token amount into the 401k temporarily.
I contribute for a pension, so I can't skimp on my contributions, and even if I could, I wouldn't want to.
quote:
Belong to a credit union with no fees, better CD rates.
Better CD rates, I'm sure that extra 0.05% is really going to get me over the hump. My bank doesn't charge fees for anything already. quote:
No car notes. Luckily didn't need tires or repairs that year. High deductible insurance, like $1000, but full coverage. Same on the house.
No car note yet you carried full coverage? Seems like you threw a lot money away there.
quote:
No cable, free movies from the library, no smartphone data plan (shoot, we may only have had one mobile at the time), a/c set at 80, heat at 67.
frick that. I'd rather pay PMI than live like shite.
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No vacations, just long weekend trips. You can take a good vacation when you have cash saved for one
Already do this.
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The biggest factor was a $650 payment on the 30 year fixed mortgage.
Is that including insurance? Even if not, that's only $120,000 mortgage, which coupled with 20% down not buying you anything good in NOLA. And if that is including insurance, that makes it even worse.
quote:
Add in the mortgage interest deduction, and we were able to do it.
Another small drop, but of course I will use it when the time comes.
quote:
THAT is why we tell you not to buy too much house to start. Sacrifice a little in the beginning, invest some sweat equity since you are handy, and you will come out ahead in the long run. I will have paid off my second house, bought for double what the first one cost, 18 years after buying that first one
I 'll have a $250,000 house paid for within 18 years if I just buy it now, and I won't have to worry about moving when I have kids or sacrifice the quality of the home my fiancee and I live.
quote:
Crazy like a fox.
I sure hope you're not advocating for that shitty company that ran these commercials. Between not kn owing the difference between gross and take home, even mention CD rates, and crazy like a fox, I'm finding it hard to take you seriously.
This post was edited on 9/8/13 at 7:34 am
Posted on 9/8/13 at 7:31 am to pottymouth
quote:
One more thing. Rent puts a roof over your head at night so that you can be a productive citizen during the day. It is not wasted money. There are certainly circumstances when it makes more sense than buying.
Well in my case, I know where I will be living for the rest of my life. I can't think of a single reason paying rent for me is better than buying, other than a possible $300 to $400 a month savings compared to a mortgage including insurance and PMI. And that would take at least 5 years using that savings to build up 20% down. That's 5 years of paying someone else's mortgage and having zero equity to show for it after. If I didn't want to live here long term, then renting would be much more viable. But that's just not the case.
Posted on 9/8/13 at 8:45 am to LNCHBOX
quote:
Well that not's really gross now is it? You're take home was $53k. So you're gross had to be higher than $60k.
Not really....do the math. As he was married he would lose around 12% of his gross to taxes.
But I see that no amount of discussion will change your mind. You have a comeback for everything, breaking an argument down to points when it is the synergistic effect of the whole that matters. For instance arguing how this and that are drops in the bucket and forgetting it all adds up.
Hope things work out for you
Posted on 9/8/13 at 8:59 am to Volvagia
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Not really....do the math. As he was married he would lose around 12% of his gross to taxes.
So zero contribution to retirement, no health insurance, nothing. That is the bare minimum in taxes, with absolutely nothing else.
quote:
But I see that no amount of discussion will change your mind. You have a comeback for everything, breaking an argument down to points when it is the synergistic effect of the whole that matters. For instance arguing how this and that are drops in the bucket and forgetting it all adds up.
Well if someone would explain to me how paying rent for 5 years will be beneficial financially for me compared to just buying now and paying PMI, I'd be more willing to listen. For example, if PMI is $175 a month, that's $63k over a 30 year loan. If I pay rent for 5 years, that's a minimum of $60k I'm spending and getting zero equity out of. At least with the mortgage, I'd have built up over $16k of equity. So how is renting possibly better if I'm staying here long term?
Posted on 9/8/13 at 9:24 am to LNCHBOX
quote:
Well if someone would explain to me how paying rent for 5 years will be beneficial financially for me compared to just buying now and paying PMI, I'd be more willing to listen.
You're talking about taking a $250k mortgage, which will have closing costs of $3k to $5k - now, you get a home inspection, pest inspection, etc., to protect you in the immediate short term, but, unless you're buying a brand new house, SOMETHING will happen in that 5 years - roof failure, A/C compressor, plumbing - something that your handiness will only mitigate, not eliminate - I guarantee it. You're responsible for that.
So, you add up - all repairs and maintenance, taxes, insurance, PMI, closing costs financed (for 30 years, with interest) - versus a raw rent number. Most apartments include all your costs, too, other than electricity and comms.
Yes, these things are "drops in the bucket", water, garbage, sewage, lawn care, etc., etc., but you're grossing $50k - those "drops in the bucket" start adding up to full points of your gross income.
quote:
At least with the mortgage, I'd have built up over $16k of equity.
Of which you'll lose a significant portion in selling (you know houses don't always sell for the appraised amount), assuming the market doesn't slide in the 4 or 5 years you're holding the mortgage - and there's transaction costs to extract that equity.
quote:
So how is renting possibly better if I'm staying here long term?
You have a solid argument that if you find the right house, there are no major problems early, get a good fixed rate now, and live in it forever (or at least 30 to 40 years), it might be a smart move long term.
(If the house doesn't have anything wrong with it, your wife doesn't have to take time off to have babies, if the roof doesn't fail while you're underwater, etc., etc., etc.)
(You'll still be overleveraged too young - then you'll likely do the same thing with cars, credit cards, etc., before your income catches up with your house. At some point, there will be a "cascade" failure of your finances - if you firewall it just at your housing costs, you might survive that - G-d bless you, it's about the only thing that's somewhat reasonable to overspend on.)
This post was edited on 9/8/13 at 9:26 am
Posted on 9/8/13 at 11:58 am to LNCHBOX
You asked how it was possible, I told you how. This was ten years ago with a 90k mortgage and pre-Katrina insurance rates, but you could do it today on a 140k house with a 110k mortgage. Yes, we had health coverage, yes we had full coverage on cars because the boss required it and gave us $300-400/month car allowance to pay for it.
Oh, I know the difference. I was self deprecating so that I could set myself up to call you crazy.
Government worker, huh? Not very entrepreneurial. Always be stuck in the middle, never get ahead if that's your attitude.
No you won't, because you'll stop making extra payments when it's time to pay $12k per kid for preschool tuition. Frickin' preschool. It goes up from there. Because you did not condition yourself to keep your hands off $30k/year by saving it, you will be scrambling to find a way to afford everything.
And you will wish you had that extra $30k socked away when the next hurricane comes and destroys the house, because you are going to need to front some expenses and pay the mortgage on an unlivable house for a while before insurance kicks in.
Like I said before,
Good
Luck.
quote:
not kn owing the difference between gross and take home
Oh, I know the difference. I was self deprecating so that I could set myself up to call you crazy.
quote:
I contribute for a pension, so I can't skimp on my contributions, and even if I could, I wouldn't want to.
quote:
Don't really feel like using my free time from work for that.
Government worker, huh? Not very entrepreneurial. Always be stuck in the middle, never get ahead if that's your attitude.
quote:
I 'll have a $250,000 house paid for within 18 years if I just buy it now, and I won't have to worry about moving when I have kids or sacrifice the quality of the home my fiancee and I live.
No you won't, because you'll stop making extra payments when it's time to pay $12k per kid for preschool tuition. Frickin' preschool. It goes up from there. Because you did not condition yourself to keep your hands off $30k/year by saving it, you will be scrambling to find a way to afford everything.
And you will wish you had that extra $30k socked away when the next hurricane comes and destroys the house, because you are going to need to front some expenses and pay the mortgage on an unlivable house for a while before insurance kicks in.
Like I said before,
Good
Luck.
This post was edited on 9/8/13 at 12:25 pm
Posted on 9/8/13 at 12:20 pm to pottymouth
quote:
No you won't, because you'll stop making extra payments when it's time to pay $12k per kid for preschool tuition. Because you did not condition yourself to keep your hands off $30k/year by saving it, you will be scrambling to find a way to afford everything.
Pottymouth - I was amazed the difference "enforced discipline" had - after a major financial setback (partially self-inflicted), much like the German army in 1918 - I had the freedom to throw out conventional wisdom and start from scratch. I had literally cashed out retirement, twice, and didn't have 2 pennies to rub together. I finally landed a decent job almost 4 years ago.
Just playing it smart, I've gone from -$150k net worth to almost positive in under 48 months - on a gross salary of under $100k - and the only windfall that came my way during the time was about $25k of insurance money.
Now, I'm still borrowing money to buy cars, but I'm trying to be as smart about that as possible - I paid off 24k in 1 year, and about to do the same with 12k. I have also delayed upgrading my house, because it is a "good enough house" for right now.
After about 19 years of generally bad decisions, not delaying gratification, I've had 4 to 5 years of playing it smart and reversed much of that - I cannot make up for lost time, but I'm trying to help the youngsters - like the OP here, realize that had I made 4 or 5 years of good decisions at the beginning there, I wouldn't have had 19 years to have to go paycheck-to-paycheck (or worse, essentially live on borrowed money and be, therefore, a slave - for 2 decades.)
This post was edited on 9/8/13 at 12:24 pm
Posted on 9/8/13 at 1:45 pm to pottymouth
quote:
You asked how it was possible, I told you how. This was ten years ago with a 90k mortgage and pre-Katrina insurance rates, but you could do it today on a 140k house with a 110k mortgage. Yes, we had health coverage, yes we had full coverage on cars because the boss required it and gave us $300-400/month car allowance to pay for it.
All this extra money you got means you weren't actually at 60k gross. You got an extra 4k after tax from your boss, plus probably other money that you weren't counting to try to make a point. It's just intellectually dishonest.
quote:
Oh, I know the difference. I was self deprecating so that I could set myself up to call you crazy.
All you did was lie about the money you had coming in.
quote:
Government worker, huh? Not very entrepreneurial. Always be stuck in the middle, never get ahead if that's your attitude.
I can't work as an engineer in a side job, it's against the rules. And heaven forbid I enjoy my free time.
quote:
No you won't, because you'll stop making extra payments when it's time to pay $12k per kid for preschool tuition. Frickin' preschool. It goes up from there. Because you did not condition yourself to keep your hands off $30k/year by saving it, you will be scrambling to find a way to afford everything.
I'm sorry, but this is a load of bullshite. 12k for preschool, where in earth costs that much? Furthermore, I know how to budget my money. I can pay for that and pay extra on the mortgage.
quote:
And you will wish you had that extra $30k socked away when the next hurricane comes and destroys the house, because you are going to need to front some expenses and pay the mortgage on an unlivable house for a while before insurance kicks in.
The 30k that I'm using as a down payment? I wouldn't have that regardless. And I can live in a house with a window unit and a generator while I fix things.
Posted on 9/8/13 at 3:14 pm to LNCHBOX
Dagnabit, I went back and checked quicken. Gross (not AGI), 55k, expense account 4k, gifts 1k. Seriously.
The Episcopal schools, Newman, McGehee all charge more than 12k/yr. Ecole Bilingue is about 10k/yr, but with extras it pushes 12. If you want the most expensive house you can buy, I assumed you also wanted the most expensive education for your future children. LINK
The Episcopal schools, Newman, McGehee all charge more than 12k/yr. Ecole Bilingue is about 10k/yr, but with extras it pushes 12. If you want the most expensive house you can buy, I assumed you also wanted the most expensive education for your future children. LINK
Posted on 9/8/13 at 3:22 pm to LNCHBOX
quote:
The 30k that I'm using as a down payment? I wouldn't have that regardless.
But you would have the interest you're not paying on not borrowing it - even at a measly 3%, that's nearly $5k in 5 years - free money - you didn't have to do anything for it, except not borrow $30k.
quote:
12k for preschool, where in earth costs that much?
Dude, it's $9k to $10k in the sticks - in "cities" it's easily $10k and up.
Posted on 9/8/13 at 5:26 pm to Ace Midnight
quote:
Pottymouth - I was amazed the difference "enforced discipline" had - after a major financial setback (partially self-inflicted), much like the German army in 1918 - I had the freedom to throw out conventional wisdom and start from scratch. I had literally cashed out retirement, twice, and didn't have 2 pennies to rub together. I finally landed a decent job almost 4 years ago.
Just playing it smart, I've gone from -$150k net worth to almost positive in under 48 months - on a gross salary of under $100k - and the only windfall that came my way during the time was about $25k of insurance money.
Well done brother!
Posted on 9/8/13 at 8:38 pm to Ace Midnight
quote:
But you would have the interest you're not paying on not borrowing it - even at a measly 3%, that's nearly $5k in 5 years - free money - you didn't have to do anything for it, except not borrow $30k.
I'd still be behind after factoring equity I'd get in 5 years. You can't make the money work. The only reason renting is a good idea is if I'm not staying here, which isn't the case.
quote:
Dude, it's $9k to $10k in the sticks - in "cities" it's easily $10k and up.
Sorry, but you are so far off base it's not even funny. $10k for preschool... Please. Maybe for the most expensive in Nola. Your numbers are preposterous.
Posted on 9/8/13 at 8:40 pm to pottymouth
quote:
Dagnabit, I went back and checked quicken. Gross (not AGI), 55k, expense account 4k, gifts 1k. Seriously.
bullshite. You didn't clear 4400 a month on 55k gross. That is literally not possible.
Enough of this nonsense. I asked for a specific piece of information, not preaching from people inflating numbers to try to make some point. Feel free to close this thread if a mod sees it.
This post was edited on 9/8/13 at 8:41 pm
Posted on 9/8/13 at 9:18 pm to LNCHBOX
quote:
The only reason renting is a good idea is if I'm not staying here, which isn't the case.
No, it's not. I'm not even saying your overall plan is bad - but you're better off in a very modest starter home - reaching to qualify with your fiance's new income is probably the thing that is getting you in trouble, is the title of the thread AND your main question for us.
You don't like the answers and are going to do what you wanted anyway. You're acting petty and petulant because you didn't get the answer you wanted.
Good luck with your debt mountain.
Posted on 9/8/13 at 10:10 pm to Ace Midnight
Let the guy get in over his head... He's already made up his mind anyway.
To OP: Read any personal finance site out there, and it will be clear you are making a risky choice. You've gotten some solid advice in this thread, no need to get upset over it.
To OP: Read any personal finance site out there, and it will be clear you are making a risky choice. You've gotten some solid advice in this thread, no need to get upset over it.
Posted on 9/8/13 at 10:11 pm to Ace Midnight
quote:
No, it's not. I'm not even saying your overall plan is bad - but you're better off in a very modest starter home - reaching to qualify with your fiance's new income is probably the thing that is getting you in trouble, is the title of the thread AND your main question for us.
I don't think I'm better off in a house my fiancée and I aren't happy in that we will just have to upgrade in a few years when we have kids. That would be a whole new round f costs for inspections, closing, etc. not to mention the hassle of selling the first house.
The title of the thread may have been poorly worded, but how else am I supposed to ask? And why is it such a crazy idea here to use our full income to qualify for the home?
quote:
You don't like the answers and are going to do what you wanted anyway. You're acting petty and petulant because you didn't get the answer you wanted.
That's actually completely false. My issue is I didn't ask for any I'd this kind of opinion. You will notice no where once did I ask what I should do or how much house should I buy.
quote:
Good luck with your debt mountain.
If a mortgage is a debt mountain, I guess most of y'all posting are right there with me. Give me a break.
Posted on 9/8/13 at 10:15 pm to DontTazeMeBro
quote:
Let the guy get in over his head... He's already made up his mind anyway.
How exactly is it in over my head? Because of PMI?
quote:
To OP: Read any personal finance site out there, and it will be clear you are making a risky choice. You've gotten some solid advice in this thread, no need to get upset over it.
How exactly is an extra $300 a month in the mortgage so much more risky?
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