please review my 12 month financial plan?

[hehateme000]

What I'm saying is that you'll get nowhere near 3.75%. And don't forget taxes, insurance, and PMI.

The fact that you don't realize the importance of 20% down and a 6 month EF is what scares us.

How about this number: According to a report by the University of Illinois Extension, homeowners need to budget 1% to 2% of the purchase price of their home, each year, to cover the costs of home maintenance and repairs. That's $200 a moth right there that you can plan on spending on water heaters, garbage disposals, leaky windows, cracked concrete, cleaning gutters, etc.

When you rent, you don't have to worry about the unexpected costs. Home ownership is nothing BUT unexpected costs, and if your budget shows us one thing, it shows us that you have absolutely NO CAPACITY for dealing with unexpected costs. And very little capacity for dealing with expected costs!

If I get 4% ill be happy.

I dont realize the importance of 20% down, but as far as the EF goes, I will still have 3 grand when I move in, plus build it up. I just dont want to get locked in another year lease in October when my current lease is up.

If I get a mortgage payment of 1050, that leaves me 250 a month extra to put towards the house! there is the 2% you are talking about right there.

Right now I have debt that Im paying off so not a ot of free money, but whether I buy or not, by October I will have an extra 700 to pay debt, build EF. If I buy, it gives me the extra 300 to put towards house repairs, so I still have 700 to pay debt and save.

[Singuy]

If I get 4% ill be happy.

I dont realize the importance of 20% down.

20% down will prevent you from paying private mortgage insurance, which can be around 84-100 dollars/month(you pay this until you are at 20%). Its definitely best to put down 20% so you end up saving a lot more money in the long run.

Also perhaps looking at 130k houses and put 20% down(lower that downpayment)...and also you really need to find out your interest rates..if it's 6-7% then you should definitely consider paying off your current debt first(and this will increase your credit score so your future interest rates on the house will be a lot better).

[~bs]

Your debt is out of control. Don't even consider it until you pay it off and build savings. I'd say shoot for 60 to 80k non retirement savings. You're looking probably 5 years at least down the line, ...

[bjl584]

I dont realize the importance of 20% down

http://www.trulia.com/blog/michaelcorbett/2012/04/seven_reasons_to_put_20_percent_down

Please read this.

[bjl584]

OP, I would make the suggestion that you stop thinking in terms of monthly cash flow. All of your arguments for doing things have been based on the notion of monthly payments, and how affordable those monthly payments are, or how much you could save in monthly payments by doing one thing or another. You need to start looking at TOTAL COST OF OWNERSHIP. Only then will you be able to determine if buying something is truly a good deal.

[fosho]

Please do not buy a house with that debt and budget. I know exactly how your thinking and I just got through with the same situation. Bought a house with 3.5% down FHA 3 months EF and had over $2000 a month to throw at debt (around 30k) and me and my wife had less debt than you currently do. 6 months after buying that house my wife got sick and was diagnosed with cancer. She lost her job and medical bills came along with her illness. The $2000+ extra a month went down to 300 a month putting us in a huge crunch. I know your thinking well I'll just sell the house in that situation.....well that costs money as well. More than you currently have in your accounts.

Don't kid yourself. Things can and will happen whether its job loss, maintenance issue, or illness and with 200-300 "extra" a month any small issue and your easily in the red. Keep renting for a little while and buy when your in a better situation. It may not necessarily need to be 20% and 6 months EF, but at least be out of debt with a few months reserves.

[FrugalDad123]

Wow, you have a very detailed budget there. I can tell you put a lot of thought into that. I started trying to visualize it. I got to just the point where you mention plans between now and October. Here's what I see so far.

I'll input the rest in a few hours. Gonna take the family out for a bit.

Regards,
FrugalDad123

[snafu]

OP: Compliments for being smart enough to set out your figures and read the comments which are not supporting your house buying rational. The 20 monthly payments listed didn't include utilities, and I visualized house insurance, mortgage insurance, property taxes and 1% maintenance. The elephant in the room not yet discussed is the mortgage amortization table that pre loads interest and offers minuscule sums to principal. Folks who believe they're building equity are not examining the figures. Look in your crystal ball to see if there will be another housing 'bubble' to give you the equity you desire.

For those of us who want our dollars to work for us, believe you need to clear existing debt before taking on $150,000. debt that has potential to sink you if you get smacked by anyone of life's negative challenges. We take having an Emergency Fund really seriously.

Finally, I don't know the housing market in your community but I wonder if your fiance will be ok with $ 150K house which may not have granite counters, stainless appliances the updated light fixtures and decor so trendy today. Realtors quickly move you into the highest level you can qualify. I suggest you pre qualify for a mortgage before shopping.

Wishing you luck

[UnknownXV]

So even though I will have money to save once I get in the house, with the low rates they are at, and how my mortgage would be 200 cheaper than my rent, still dont try to buy a house? I guess I feel as if I should get in a house because rates are so low. Since my job is secure, then i could build up an EF.

So what if I still went for the house, while paying off debts as I have listed, and then instead of the car I start putting an extra 600 towards student loans?

I feel as if getting a house is very important to me since we will stay here at least 5 years, and be building some equity, and be locked in an awesome rate. plus mortgage be cheaper than rent, however i know there are repairs and maintenance expenses.

LOL those bb.com guys are losers, I usually go to EliteFitness, just a better place overall.

You have a promise of money saved.

No income is ever guaranteed, it's the worse financial mistake people make, assuming.

[Petunia 100]

I am late to the party, but just a few thoughts:

If I get 4% ill be happy.

I could be wrong, but I don't believe this is realistic. When you see rates quoted, they are usually the very best rates available, for borrowers with 20% down and good credit (generally 740 or higher). You don't seem to fit those criteria at this time. (Yes, another reason experts tell you to have 20% down is because the mortgage rates are better).

Have you spoken with a mortgage lender? I suspect that when you do, you will find you do not qualify. But if that should happen, don't let it discourage you. Instead, ask why you do not qualify. Then you will know where to focus your efforts as you work towards getting ready to buy a home.

Also, I have seen you state you will have 8k total for a down payment, closing costs, and appliances. Then you state your 8k will be 5% down. The reality is closing costs will gobble up a big chunk of your 8k, if not more.

What sort of place are you renting? Would it be possible to find a suitable, less expensive place to rent while you are working towards your goal of buying a home?

Buying a home is a fine goal, but doing so before you are financially ready can cause your dream to turn into a nightmare.

Also, I noticed you have no line item in your budget for groceries. This makes me think you are estimating your expenses, not tracking them. I suggest you start tracking every dollar to see where they are going. For most people, it is a very eye-opening experience. I know it was for me.

[mgkimsal]

Posting a bit late here, and maybe someone else made this point, but... why is this a decision between "buy a house now" and "rent at $1300/month for another year"? Can you not find another house/apartment to rent/lease that's a) cheaper and b) perhaps better in other ways compared to where you are now? You may even be able to find a place to rent where the landlord would credit some of your rent towards the purchase price should you decide to buy the place after a year. You'd effectively be making a small downpayment out of your rent each month.

[Goldy]

If good interest rates are what you are after then maybe you should think about waiting on the house until you better your credit. A better credit score will lower the interest rate you can get a loan for. I plugged in some numbers for you and the lowest rate I could find for a home based on your info is about 5.5% with mortgage insurance of an extra 160 per month. I highly suggest waiting on the house until your bills are in better order.

[hehateme000]

Thanks for the replies guys. My credit is about 660 right now, so maybe it will be higher by December. i will talk to a lender about more details about what I would be getting into. I told fiance maybe we would rent for another 6-12 months.

[johntomba]

Hey guys, new here and excited to stay and read up on everything. I am 23, currently engaged, and have 2 kids. My fiance and I make 4000 a month after taxes and 401k.

We are currently saving for our first house wewant to buy in October, since that is when our lease is up for our current house. We are looking in the 130k - 170k range. We are going to save as much as we can for a down payment, closing costs, appliances, etc. We currently have 3100 but by then we will have 7500, plus 2500 in EF.

Also by the time we get to October we will have paid off some debt like bail, old car accident, engagement ring, and traffic tickets. So as soon as we move in to our new house we will be able to save about 1000/month.

My question is, i really want a new car. I would wait till next year to get it, but i think i should wait longer. We currently have a 07 jeep liberty , 278 a month for 4 more years. Upside down in it right now. Also have a 96 accord no payments. I want to keep paying jeep off until the value is equal to the loan or more, trade it in and use any extra cash as down payment on a 2012 charger srt8. Its a dream car. I wohld have it for 10 years easy. I know my car payments would go up to about 500-600 but i wouldnt really have any other debt besides school loan. Is getting a newer car and having payments ok if i am still able to save money towards other stuff like 401k, EF, vacations, house and car repairs, etc...

Thanks for any advice and help

Get a used car. End of story.

[Frugal Guru Jenny]

.......Wow. You are living well beyond your means. You shouldn't save for a house. You should eliminate debt. You should not buy another car. The car you're paying for now is too expensive for you, and the interest rate is outrageous.

First, you need to eliminate expenses. DirectTV, the tanning package, the gym, and the phones are immediate problems right now.

Her relatives either need to pay their part of the phone bill, or they need to get CANCELED every time their line comes up for renewal.

The tanning is not just a luxury but a vice. You can't afford it, and it's terrible for her, anyway.

You simply can't afford both DirectTV and your internet package. Cancel the DirectTV as soon as your contract is up.

Choose a cheaper gym.

Next, you have some lifestyle-related expenses that you shouldn't have. You're stuck with them now, but for the future.....

The car accident, the traffic ticket, the court charges, and the bail. These are all expenses that have come from making some extremely poor lifestyle decisions. Whatever is happening there needs to stop. You guys have two kids--two kids who look up to you and will model their lives after you. You guys need to be setting an example for them in your own lives, never mind the completely unnecessary expenses that your bad decisions have caused.

The TV, the engagement ring, and the car. These are things you couldn't afford but you wanted, so you bought them anyway. You have to scale your expenses back to your actual income. If you want a TV, you need to save for it FIRST, then buy it. Ditto an engagement ring. Just because you have 0% financing doesn't make it not a debt. It's too late to change most of these things, but in the future--no more debt. The interest rate on that car loan is crazy, probably because of all that other debt you're carrying.

First, pay off the credit card bill that has gone to collections. You don't need that to hang around your credit report.

Then you need to take whatever you thought you could save--$1000 a month, whatever--and put it on that car until the loan is gone.

Then take $1300 a month an pay off the $2,365.41 student loan, then the $2,642.96 student loan, and then the $6,424.67. Then hit the $3,459.67 and finally the $4,514.24 student loans.

And after that, pay off any other debt that remains, 0% or not.

And don't put anything else on credit anywhere. No furniture. No clothes on layaway. Nothing.

When you're done, then you can start putting 10% in your 401(k). And after that, you can save for a house.

As far as the wedding goes, it's not the price of a wedding that makes it mean something. It's what the people put into it. You should spend as little as possible because a wedding isn't about the event but about your future, and you shouldn't start on your future by making bad financial decisions together and sabotaging it. Marriage is about being together and forging a life together. It's not about a ceremony. You have two kids together--quite frankly, the marriage is LONG overdue. Once again, think about what you are teaching your children about your priorities. What's more important, a white dress and a cake or that you truly become a family?