My wife's cousin is crazy...

[tripods68]

There are few things that annoy me in life. But when it comes to money and spending I'm usually chatty. Ever since my wife's cousin husband died (not long ago), she wants to buy a house so she would stop moving all the time. She talks big in how she wants to buy a house, but when I figured her income and expenses; she can't afford it. But insists she can. Now my wife's is becoming annoyed with her and the rest of the family. She's a renter now, but wants to buy a house brand new around $1400 per month. Here's her situation.

She makes $1500 Net Income per month. She gets an additional $1400 from SSI survivor (Total $2900 per month income). Expenses $400.00 a month for a car, insurance, medical insurance, gas, food, cable, and utilities. Her credit is not as strong around less than 660 below FICO. She needs at least 40% debt/income ratio. From what she has income/expenses, no way. Even if she goes towards interest only, no lender would touch her. But she figured she'll partner with a friend as joint owner.

We've told her she needs to be patient and continue to save towards a house someday. When she pays off her car, she can add more towards her savings.

[safari]

Her expenses seem very low. I can't imagine how her car payment, insurance, medical insurance, cable, phone, gas, electric bill, and food total only $400 a month. That number doesn't seem right to me. You also have to keep in mind that if she buys a house, she'll have to pay property taxes and insurance. Does she have any savings? How much can she put toward downpayment? If she can't put down 20%, she'll have to pay PMI (private mortgage insurance). What about retirement savings? Is she contributing anything toward 401(k), Roth IRA, etc.? I don't think she can afford buying a house, given that her income is only $2,900.

[tripods68]

I agree.

Just to clarify, she makes $400 a month car payment plus $2200 other bills (ie., rent, utilities, cable, food, etc.) She doesn't contribute to her 401K, no savings at all. I didn't mentioned PMI, closing cost, PITI, etc cuz i know she couldn't afford it with her regular monthly bills.

[Coleroo]

hehe.... i was shocked at first too - i was thinking, DANG her expenses are only $400 and you still think she can't afford it? i was about to ask for her email so i could learn the wisdom of her ways... teehee.

[disneysteve]

Her current bills total $2,600 and she takes home $2,900. Owning costs more than renting in most locations when you add in taxes, insurance, utilities, maintenance, etc. She's only got a $300 cushion and zero savings. She has no downpayment. No EF. No retirement savings. And poor credit to boot.

How does she possibly plan on affording a house. Unfortunately, in recent years, these are just the types of people who have been buying and are now facing foreclosure in record numbers. Hopefully, lenders have wised up and stopped lending to people like this.

[jIM_Ohio]

There are few things that annoy me in life. But when it comes to money and spending I'm usually chatty. Ever since my wife's cousin husband died (not long ago), she wants to buy a house so she would stop moving all the time. She talks big in how she wants to buy a house, but when I figured her income and expenses; she can't afford it. But insists she can. Now my wife's is becoming annoyed with her and the rest of the family. She's a renter now, but wants to buy a house brand new around $1400 per month. Here's her situation.

She makes $1500 Net Income per month. She gets an additional $1400 from SSI survivor (Total $2900 per month income). Expenses $400.00 a month for a car, insurance, medical insurance, gas, food, cable, and utilities. Her credit is not as strong around less than 660 below FICO. She needs at least 40% debt/income ratio. From what she has income/expenses, no way. Even if she goes towards interest only, no lender would touch her. But she figured she'll partner with a friend as joint owner.

We've told her she needs to be patient and continue to save towards a house someday. When she pays off her car, she can add more towards her savings.

$400 bills, $2900 income suggests $2500 is available for "other". $1400 of the $2900 to a mortgage sounds reasonable (48%) assuming taxes and insurance are included in the $1400 housing payment.

What is interest rate on loan?
what is cost of house?

I would caution adding anyone else to mortgage, unless they pay 50% of costs for 50% of risk.

The lack of savings and poor credit rating are "alarms", but giving family members financial advice is also an alarm.

[filifefc]

it never fails to surprise me how little people save...

[Staceyy]

Did she maybe inherit money from her husband that she plans to use for her downpayment? Also, sometimes people are mentally unstable after the death of someone close and make grandiose plans that seem foolish to others.

[tripods68]

No inheritance, no insurance, no savings but a mental case probably...lol.

[Landwatch]

A mental case indeed it is and that also with "no saving" grace