New financial outlook...just me.

[ScrimpAndSave]

Salary:
2008-2009 School Year: $50,298
2009-2010 School Year: $59,525
2010-2011 School Year: $67,232
2011-2012 School Year: $75,849

Each year add an extra $2,500 for a special committee I am on at work.

I also make $4,000 each summer directing a Pre-K Program...but I do not count this into my total annual salary. It is a grant program and can possibly fall through (though it is not likely).

No credit card debt.
Car is paid off.
Rent is $400 a month.
Gym is $20 a month.
No other payments at all.

I currently save $2,000 a month.
Total current savings: $16,000.

My dream is to buy my dad's house. I would be around $300,000. Is it just a dream? I would do it during the 2010-2011 school year when I am making around $70,000. I would have 20% to put down...


::sigh::

[MiikeB]

Not at all a Dream, but I think the payment might tie you down more than you would want as a single.

[ScrimpAndSave]

I find that it really depends on what interest rates are like. I would also consider putting down 10%, getting a second mortgage for 10% and then having a main mortgage of 80%...

I don't know. I've just always wanted this house and when my ex-fiance broke off the engagement...I just thought it would be impossible to own it. Maybe I am better off in a way? I have no idea. I would like to keep my housing costs (PITI) below $1,500 per month.

I just need to know what is possible for me.

[momof1in150]

Does your Dad own the house with no mortgage? If so, would he consider owner financing? You would need a lawyer to draw up the paperwork but could work for you. If he doesn't want to do owner financing for the whole mortgage then he might be willing to do financing for the 10% so you don't have to get a second mortgage at a higher rate (when you do an 80/10/10 the second is 2-3% higher then then first).

[ScrimpAndSave]

Yes, he does own the home with no mortgage...and he has for about 25 years. If he does owner financing, doesn't that mean that he won't get all the money at once?

And yeah, I do know about the send mortgage rate. He was actually thinking of paying off the 2nd mortgage for me - but then taking that total amount out of his estate (so, I basically would be getting my inheritance earlier).

[momof1in150]

Originally Posted by ScrimpAndSave

Yes, he does own the home with no mortgage...and he has for about 25 years. If he does owner financing, doesn't that mean that he won't get all the money at once?

And yeah, I do know about the send mortgage rate. He was actually thinking of paying off the 2nd mortgage for me - but then taking that total amount out of his estate (so, I basically would be getting my inheritance earlier).

He would receive a monthly payment from you with interest. Here is a link that might explain it better:

Owner Financing - Owner Financing in Real Estate

[ScrimpAndSave]

I think it would be better for him to have all the money at once. Plus...he is 75...what happens if...you know....something happens before the end of my loan? Then I just pay the estate?

Thanks for the link!

[disneysteve]

Personally, I think a $300,000 home is pushing it for someone earning $70,000. That's more than 4 times income. However, if your income continues to increase at a similar rate to what you've posted, within 2-3 years after buying, you'd be making 100K which I think would be just fine. So it might be tight at first, but that's often the case when people buy a house. As long as you have a fixed-rate mortgage, the payment becomes gradually more affordable as time goes on and income grows.

One thing that I'd think about, though, is the possibility of another relationship in your future. I know that's the farthest thing from your mind right now, but it certainly can happen. If you meet someone else in a year or two, plans could change again.

I'd say that right now, for the next 6-12 months, you should do nothing. Don't make any major financial decisions. Let the dust settle. Keep socking money away, but stop trying to predict and plan for the future. Decisions made in the midst of emotional upheaval are often regretted later. The house isn't going away. Let your savings continue to grow. You can decide what to do with them at a later date.

[cptacek]

Originally Posted by disneysteve

I'd say that right now, for the next 6-12 months, you should do nothing. Don't make any major financial decisions. Let the dust settle. Keep socking money away, but stop trying to predict and plan for the future. Decisions made in the midst of emotional upheaval are often regretted later. The house isn't going away. Let your savings continue to grow. You can decide what to do with them at a later date.

I agree with this. I know after I had a bad breakup I made myself wait for a year before making any tough decisions, and after the year, I knew I wasn't running away from anything anymore. I felt good about moving closer to home because I wanted to move back home, not because I wanted to move away from TX. Of course, the exact time frame isn't important, the mental state is.

[jIM_Ohio]

Look for the 15/5 method I posted earlier.

15 percent to retirement
5 percent to short term savings

Then when the 5 percent portion becomes large enough (around 30-60k), look to buy the house. 80-10-10 or 80-20.

You can probably turn the 15/5 into 15/45 because your expenses are low. You have the advantage of no SL debt... just make a decision for what YOU want and work towards the goal.

How much is in savings now?

And remember my forest vs trees analogy. You have a house tree, a retirement tree and a financial plan forest. You really have not shown any actions towards a whole plan, a whole philosophy which governs all financial decisions.

For example my goal is retire early. 2026 is the goal. All actions- buying a new car, 401k allocations, day care or vacations fit into that single goal. House, shopping, budget or anything else done with money.

Without a long term goal or financial plan you will bounce from tree to tree, get many headaches and possibly not accomplish much financially.

[ScrimpAndSave]

Jim, I have about $17,000 saved now...and I save $500 a week and put it into the "house fund".

I *should* have about $40,000 at the end of 2009.

[jIM_Ohio]

So into 2010 you will have the 60k needed.
17k now
43k needed can be reached in 86 weeks.

My advice would be to get 60-70k set aside so you can play with down payment, points and have a small EF established.

You can also get 2 year cds for money right now to get a higher return than a money market (maybe- check rates).

Set a goal, achieve the goal. Impatience could be your downfall- best to set long term goals and short term goals and works towards ALL GOALS so impatience does not set in.

[ScrimpAndSave]

Disneysteve, I am definitely not going to buy anything at this moment. I just want to know that I have a goal set and I can still move toward something.

I think setting out for just getting to $40,000 this year is a good goal for now. I will feel like I am really making progress.

As far as my salary, the numbers I listed are contractually agree upon between my union and administration...it resets the following year...so I probably won't have a huge increase after that...I am assuming I will be sitting around 90K for a few years after this contract....which honestly - works for me.

As far as meeting someone else..I know it is possible...but I want to try to handle things on my own and build my own future minus prince charming. If he comes a knockin' - great...if not, I will have my own assets and responsibilities anyway.

[disneysteve]

Originally Posted by ScrimpAndSave

I am assuming I will be sitting around 90K for a few years after this contract....which honestly - works for me.

I think 90K/yr. for someone who is a great saver and used to living lean would be fine in a 300K home, especially with a 20% down payment. Even if income doesn't rise as quickly in future years, it will still rise some from year to year.

[ScrimpAndSave]

Yeah it will...and I don't know if I have mentioned it before, but I got my Masters in Educational Administration in May of 2008 - so I am looking to become an assistant Principal within the next few years...not that I would ever base my mortgage on this.

My dad keeps saying, "We will make it possible for you to own this house. I cam give you $500 a month toward mortgage...giving you $6,000 a year would be like nothing." And I tell him that I don't want him to help me at all...I want to be able to do this myself...then he says that when it comes to my inheritance, the amount that he gave to me (the $500 a month) would be deducted from my share. And he said that in turn I am preserving the house for all of the family - even though it is mine.

Sounds like a sticky situation to me. I just want to be able to afford the home on my own.

[jIM_Ohio]

You may want to save the money at PenFed- it's a credit union and you would need to qualify. They have the lowest mortgage rates I have ever seen.

My acceptance came in mail today. I plan to pay off my 2nd then refinance with them.

[LivingAlmostLarge]

Definitely you could find a new relationship sooner than you think.

[ScrimpAndSave]

I really don't want to find a new relationship. I want to focus on getting established 100% on my own...then if something happens in the romance department - great. If not, fine.

[m3racer]

Originally Posted by ScrimpAndSave

I really don't want to find a new relationship. I want to focus on getting established 100% on my own...then if something happens in the romance department - great. If not, fine.

That's the smartest thing I heard you say. BTW, what's wrong with just renting?

[ScrimpAndSave]

I am renting from my dad now...it's just that we live together. It helps him pay his property taxes and we get along well...and we update the home together. It works for us really well.