How much should I have in my EF?

[ScrimpAndSave]

I currently live at home and pay $400 rent. I am planning to buy a house in the beginning of 2010 and probably have a $200,000 mortgage. With PITI and a 15 year note, it will be around $2,000 a month. Utilities and other bills are about $1000.

Should I save about $10,000-$15,000?

Thanks!

[maat55]

15,000 to 20,000. Are you relying on two incomes? if so, you should do 20,000. If one, 10,000 to 15.000 is ok.

[disneysteve]

Are you asking how much you should have right now or how much you'll need after you are in the home 2 years from now? If sounds like the latter. If so, with anticipated expenses of $3,000/month, a 6-month EF would be $18,000. I think that would be a comfortable spot to be in.

[ScrimpAndSave]

Well..plans have changed a bit.

It looks like we will be buying my father's house in the beginning of 2010. He will be giving us a gift of equity and also a $48,000 downpayment (part of my inheritance since he is selling the house). He will be giving us each $12,000 in 2009 and $12,00 in 2010 (to avoid getting taxed - that is how we get $48,000).

He will also be taking 6% off of the purchase price because that is how much he would be giving a realtor if he was selling it to someone else.

SO...I am trying to make sure that I will have enough of a downpayment and also enough in my EF once we are ready to buy it.

According to my money plan, we will have $40,000 saved in January 2010...so I think we will be ok.

[jIM_Ohio]

$48000 down payment is larger than $40k you will save- remind me again how you are "OK"?

[disneysteve]

OP - Can you do us all a favor? You've posted a bunch of times about different possibilities with the house, buying, staying in dad's house, buying dad's house, etc. Can you give us a clear review of the current plan? What will you be buying? When? How much will you be paying? How much will you put down? What will your father be gifting you? Etc. I think a bunch of us have gotten confused - I know I have.

[gamecock43]

I think she is planning to save $40,000 in addition to the $48,000 her father is giving them.
I am curious about how it will all go down too though. I think this could be fascinating with all the equity gift?, gift tax laws?, and psychological impacts on the siblings and inheretence division too.

[DebbieL]

Can I ask if he's giving EQUAL amounts to your siblings (and if not why)? I can really see this whole situation causing bad blood between family members. I just feel like it would be better to find your own place. It's your life though. Personally, buying my parents house (which it sounds like he is almost giving it to you) would seem like being stuck in childhood to me.

[ScrimpAndSave]

Hey thanks for caring about my situation! The current situation seems to be the most likely.

My father is going to give each of is $48,000 during the end of 2009 and the beginning of 2010 ($12,000 to each person - so my soon-to-be hubby will be getting $12,000 and I will too...and so one with my siblings.)

I will have $48,000 PLUS $40,000 saved (this is a conservative estimate - I should have closer to $50,000). So, I will have approx. $90,000 saved in cash towards my downpayment and emergency fund.

When it comes to gift equity - that is where it gets a little hairy and we are just going to consult with a tax attorney. If the house appraises for around $300,000 (which is what we estimate), my dad is going to either cut the price about $18,000 (6% that would go to a realtor if he were selling it that way). OR he will give us the gift of equity - but I would rather not go that way because of tax ramifications (again, we are going to consult with a tax attorney).

So it looks like we are going to put about $50,000 down (gift from my father) and then have $40,000 in the EF (what we have saved now). The house does not need major repairs...but I of course would love to update it. My fiance feels as though we should hold on on updating things...I can be patient.

As far as salary, my salary will be $57,725 the school year we buy the house.
The upcoming years will be like this:

2010-2011: $67,232
2011-2012: $75,849
2012-2013 $84,894
(We signed an AMAZING teaching contract!!!)

My fiance finishes law school in May 2009...his first job will probably be around $45,000 a year (law clerk). After that, it will hopefully increase.

So BASICALLY...we are looking at:

Joint Salary of $110,000
Law Student Loans $120,000
Mortgage of $200,000
NO Credit Card Debt
Cars Paid Off

::whew::

Is that a pretty good run down?

My siblings are supportive of the decision. I have a very successful sister making millions in Atlanta and she's just happy for us, my other two siblings are happy with the situation as well - because they would love for the house to stay in the family in order to have a place to gather together.

Looks like a 30 year mortgage would be around $1,600 (with PITI) and a 15 year mortgage would be around $2100 (with PITI). I would LOVE to take out the 15 year mortgage and throw extra $$ at it and get it paid off!

I have a fully funded ROTH IRA, and annuity (with only $3,500 and not adding anymore - from a previous job) and a pretty sweet pension.

We are both 27.

Here's a pic of it.

http://img.makeupalley.com/7/1/5/6/1007133.JPG

[ScrimpAndSave]

And is definitely not even *almost* giving it to me.

[gamecock43]

How is your dad getting $25,000 a year for 2 years to give away? Do people really have that kind of money sitting around liquid just before or (during?) retirement?

[ScrimpAndSave]

Yeah...I think he has about $400,000 in his portfolio (conservative, safe growth)...so he may take it from there. Or, he will take out a home equity loan from the last week of December to the first week of January and pay it off when he sells the house to us. There are 4 couples, so he would end up giving a total of $192,000 to all of the kids and then he would have to rest to invest in a fixer upper in Hilton Head Island, SC...that's what he wants to do - haha.

He's 74.

[gamecock43]

hilton head SC. Hilton is verrrryyy expensive. But georgeous. And wow for him being able to give that money away!

[ScrimpAndSave]

Well, he has found places for around $200,000 - $250,000. Price of living there is actually cheaper in Hilton Head Island.

[disneysteve]

I will have $48,000 PLUS $40,000 saved

my dad is going to either cut the price about $18,000

So it looks like we are going to put about $50,000 down (gift from my father) and then have $40,000 in the EF (what we have saved now).

Just so I'm clear, your father will give you and your husband a total gift of $48,000. To keep things fair, he will do the same to each of your 3 siblings. You will then turn around and give him back that money as your down payment. Plus, he will discount the purchase price by $18,000. So all together, his gift to you will really be $66,000. If he gives each of your siblings and their spouses $48,000, you are still getting $18,000 more than them in the form of the discounted purchase price.

I hate to be pessimistic, but I prefer to think of it as realistic. I have seen way too many families torn apart by battles over money after the parents died. I would be very concerned that this deal is going to come back to bite you when your father ultimately passes. Somebody is going to say, "We should get a bigger share of the pot because you got more than us when he sold the house to you." Everybody may deny thinking that today, but when the money is actually on the table to be divided, people change. I've seen it happen many, many times.

I'd suggest working the deal so that each sibling gets an exactly equal amount. You shouldn't get $18,000 more than your other siblings.