Do we need a financial planner?

January 12, 2007 6:46 AM

Because we are looking to buy our first home in the next few months, my husband and I want someone with more knowledge to help us figure out our financial situation - where we're at and where we should aim to be. I am not sure if what we're looking for is a financial planner, or if this is even really necessary to do before we go home shopping. My worry is that most financial planners (if that's even what we'd want) seem to be focused solely on retirement planning & investing. I'm not sure if that's what we need.

Basically, my husband & I are 27 & 26 respectively and were married last year. We both have decent jobs, and are not in a ton of debt - I have a credit card balance that we need to pay off, and some student loans that are very low interest that we're not in a rush to pay off. We have no car payments and pay all our bills on time, etc.

Due to our personal savings and some generous wedding gifts, we're at a point where we feel ready to put a down payment on a house. We pay a lot in rent to live in an apartment that doesn't really meet our needs...we're both extremely tired of apartment living and feel ready to take on the responsibility of owning a house. All of the mortgage calculators we've tinkered with have indicated that we should be able to afford the type of house we're looking at with our down payment amount plus a monthly payment that's not that much more than our monthly rent.

We are also at the point where we're thinking about having a child within the next 2-3 years.

Because of these two huge responsibilities, we kind of want someone with more experience to look over our finances and help us determine if we're doing the right things with our money, and how best to prepare for our future goals.

What's the best way to do this? Is there a professional we can hire to do this? If so, how do we find one who is reputable and won't try to sell us stuff?

Or would we be better off getting some books (any recommendations would be appreciated) and doing some hardcore research?

What do most people do in our situation?

posted by tastybrains to work & money (7 comments total)

As a homeowner I would say that I probably didn't have much more than your current level of certainty about my finances when I bought my first place (about 9 years ago). In your circumstances, if I had wanted more reassurance, I would probably look for a book to just make sure I'd covered the bases. I think a financial planner would be overkill - it will cost you several hundred if you don't want to be sold stuff on commission.

Things you might not have thought about:
- overheads of buying - solicitors fees, mortgage fees, moving costs.
- overheads of owning - basically all the maintenance costs your landlord pays for, house insurance

Unless you're stretched to the limit I don't think any of these should be deal breakers, but its as well to factor them into the budget.
posted by crocomancer at 7:14 AM on January 12, 2007

I asked a similar question last year, and the common answer I received was to find a fee-only Financial Planner. However, for our small amount of assets the high up-front cost really wasn't worth it. Jdroth's page about building your "financial house" is the most helpful information I've found. (Thank you, hivemind!) It de-mystified financial planning and goals, broke it all out into simple steps, and showed me how we could responsibly manage our finances without an expensive advisor. He has a personal finance weblog now too.

I had the same feeling you had -- I thought we were ready, but I wanted someone older/smarter/more experienced to look at my finances and tell me, "You're ready." I never found that person, but becoming more educated made me feel confident enough to take the leap -- we closed on our first house in October. Good luck! You're gonna be just fine.
posted by junkbox at 7:21 AM on January 12, 2007 [1 favorite]

What do most people do in our situation? blow it.

You have 401Ks and/or IRAs going at max?

Where are you thinking of buying? Most markets are declining right now, making a purchase a bit premature for the immediate future.

Pay off your credit card balance and NEVER EVER run one up again.

Depending on where you live, you may find it more advantageous to RENT a house -- to get that nesting feeling -- for a year or three while the neg-am monkeys finish falling from the trees, leaving a market more favorable to buyers with CASH and spotless credit.
posted by Heywood Mogroot at 7:23 AM on January 12, 2007

Ah, I see you're in the Boston area. . .
posted by Heywood Mogroot at 7:36 AM on January 12, 2007

I'm in the area, and will shoot you a recommendation for a financial planner we used, who is fee-based and not beholden to anything like Ameriprise. It is a bit pricey per session, but since we were doing a complete financial overhaul, it was worth it.
posted by canine epigram at 8:08 AM on January 12, 2007

Our credit union offered lots of financial advice for free when we were buying a house. But we weren't nearly as pedantic about it - our financial goals can pretty much be summed up as "making it to the next paycheck" without tapping the savings.
posted by M.C. Lo-Carb! at 8:09 AM on January 12, 2007

Visit your credit union or bank, and ask them to pre-qualify you for a mortgage. They have a vested interest in getting you to qualify, as they want to loan money, but also in helping you qualify for the right amount, as they want you to be able to pay the loan. They'll make money if you choose to finance through them, so they should be delighted to help.

You can't really predict if housing values will rise or fall, or if mortgage rates will go up or down. You've already decided you want to live in your own home.

Once you know what kind of mortgage you qualify for, start visiting open houses, and get a feel for what's out there. There seem to be a lot of motivated sellers. Take your time, and don't take much, if any, advice from real estate agents - their vested interest is only in selling you as much house as possible. It's easier to buy a small house and trade up than to buy too much house and get strapped.
posted by theora55 at 10:10 AM on January 12, 2007