My fiancee and I are buying a house in the next few months. We're looking for some financial guidance regarding some tricky judgement calls I have to make in short order. Thanks for any help!
posted by amcm to Work & Money (29 answers total) 2 users marked this as a favorite
My fiancee and I are about to buy our first house. I have been reading every 'how do I buy a house' thread on AskMeFi for the last five months or so, but I would greatly appreciate any advice specific to our situation that you generous people could offer. I apologize in advance for the length (but this is also helping me organize my thoughts, too).
2nd year grad student at a highly regarded clinical psych PhD program. Makes a $16,500 stipend from school (paid Sep through May), is able to work at her old job for a few months each summer and make a few thousand dollars. Most likely very good credit. No debt, school or otherwise. We both own our own (boring and reliable) cars, which we bought new and paid off quickly.
She currently rents an apartment by school, and her lease is up at the end of August, which is when we want to be moving in to our house. We are getting married at the end of September.
She has $40K in savings. Her parents have $20k that they are going to give her for a down payment. This is absolutely a gift and will not be repaid; it's the money they saved on her schooling from finishing early and getting scholarships and funding.
I was in the Marines for 4 years, and when I got out I went back to school. I graduated one year ago this month. In that year I started a non-profit art school with some friends, for which I am the treasurer. I might be able to make a little money teaching at the school in the next year or two, but for now it actually costs me (and the other founders) around $350 / month to cover the bills. We are at the tipping point of solvency, though – one or two more students, or a renter for one of the studios in our building and it breaks even. There are no more start-up costs on the horizon, just monthly bills.
I have been broke as a joke the last year. I did not apply for or take any public assistance. My few thousand in savings went toward building the art school, and the credit card balance slowly crept up ($3500). I have never missed a payment on anything, though, and have lived very, very frugally. I knew what I was doing when I slowly ran up the credit card, it was a tool and I used it. The few K in debt is well worth what I will get out of it in the long run from being a founder of the school (it is not hyperbole to say that getting in at the ground level of a little school like this, and eventually teaching there, is the best career path a visual artist in my field can make).
Was just hired by my father's successful company last week at $36k / yr, plus year end bonuses. I have worked for this company as a contractor for the last five years, taking on more and more responsibility. We (hopefully!) are about to expand dramatically, and the field we're in is very secure.
I am a veteran, so I qualify for a VA loan – that means no PMI and hopefully a lower interest rate.
I am very, very handy – I can fix or build almost anything.
I have around 12K in student loans. According to every calculator out there, my payments will be just under $140/ mo. I have a credit card with a $3500 limit, and it is maxed. This month, with my first paycheck I am going to make a $1200 payment on the card to reduce my debt to credit ratio. As of right now I plan on making the same '1/3 of credit limit' payment next month as well, paying the card off within four to five months. I don't actually know what my credit score is (I didn't want to burn my free credit check prematurely, will be explained below).
Last month or so I found out that the grace period for student loans was three months shorter than I thought it was, and I was two months behind! I immediately get a forbearance, retroactively to the date that I was supposed to start payments.
There is no ugly! I am very thankful for that. Maybe the student loan this is Ugly, but I'm hoping it isn't, or if it is, that I can untangle it quickly.
My job and her career are both quite secure and have a lot of potential for growth, but we've budgeted very conservatively. For income we are only counting our net after taxes. We will receive a nice tax refund, bonuses, money from side work that I do, and her summer income, none of which we are counting on whatsoever. All of this extra stuff, along with at least 10% of our monthly take home pay will be saved. We don't plan on having kids until one of our incomes increases by at least 1.5 times an average 'cost of having a kid' unit.
After budgeting our expenses, projected bills, and what we want to save, it looks like we can afford about a $1,000/ month mortgage payment.
So now, here I go with the questions:
Should we run my credit now, or wait a bit for my drastically-credit-to-debt-ratio-reducing CC payment to show up on my report (and how long would that take)? Would the more accurate, lower CC balance score be worth waiting for, or should I get the score as soon as possible to make sure there is nothing weird on it?
Am I worrying too much about owing a few thousand on a card? Would the $1200 I plan to pay on the card next month (the second large payment) serve me better as cash-on-hand for closing costs and all of that?
Should I actually try to increase the credit limit on that card, or get another credit card from somewhere else to further decrease my debt to credit ratio?
What is the best way to extricate myself from my student loan situation? Should I just call them up and turn the payments back on? Is the amount of my income-based monthly repayment interdependent with my mortgage-worthy-ness in such a way that I should do things in a specific order? This is literally the only financial thing I have screwed up in like ten years, and it came from visually flipping a six for a nine.
What impact, if any, is a VA-backed loan likely to have on our interest rate? What interest rate are we likely to get (ballpark)?
When should her parents giver her that 20K? I'm thinking asap, with a letter signed by everyone that it is a gift.
How much should my fiancee put toward our down payment from her savings? Is $10K a good amount? We've been figuring on around $10K, which will be around 12% down on a 250K house. Would we be better served using more? Using less?
I could possibly ask my mother for a little cash to help toward a down payment, too. She is very financially secure. Any reason not to ask?
How do I approach a bank about my work situation? I made very little money last year, but I did manage to start a business, and I am the treasurer for the place. I managed a substantial budget each month, and was able to meet all of my personal obligations on just about no income. I am very responsible – how do I get a bank to realize this?
I have my personal account at a local bank. My dad's business and the art school both have accounts at the same local bank. I would like to use the same bank for the mortgage for simplicity's sake, but also because I like the way they do business. Would their knowledge of everything – my non-profit's account, one of my employer's accounts, and my personal account color their picture of me as a borrower in any appreciable way? I am going to get the cheapest loan with the best terms possible, but I would like to get a quote from them, and I'd use them over someone else if the payment was just a few dollars more.
Lastly, how to proceed? Get pre-approved first? How does one actually do this – call up banks? Stroll right on in? Does my fiancee need to be present at everything (she currently lives an hour away)? Look for loan offers over the internet?
We may move in 5 years or so when she is done school, at which point I'll still work for my father's company, possibly branching our services out to wherever her career takes us (my job is not very location dependent). I would also start a branch of our art school wherever we go, using the brand we will have built here to get a few private students in our new city. We should have 75K or so saved by then, enough for another down payment wherever we go. I would like to keep whatever house we buy here and rent it out, as the average rental in our current city is about $300/month more than our mortgage payment will be, accruing equity and continuing to take advantage of today's killer interest rates. We could also end up staying where we are (which we would both prefer) Is there anything about this that seems infeasible?
That's it for now. Once it comes time to put pen to paper, I will be back in here asking abut mortgage terms.
If there are any further details I can give, I would be happy to provide them.
Thank you for making it through my post, and thanks in advance for any help. I really appreciate how generous MeFites are with their time and expertise. This is an awesome resource!