23 years old and need massive financial advice for getting a mortgage for parent’s ho

[kitsune89]

Hi guys, I'm a long time lurker for small savings tips but now I need to worry about some pretty big stuff. This is a really long read and I don’t even know if this is the proper place to even ask for help. If this isn’t the correct place, I would really appreciate it if you could direct me to somewhere else. I’m providing a lot of information because I’m not entirely sure what might be important and what isn’t. Either way I’m really grateful for you taking the time to read this.

I’m 23 years old and I recently got a job in January and make $45,000. I’m currently living with my parents in an apartment in Irvine, CA and we’re paying over $2000/month for rent. I would like to help them get a home as soon as possible so we can begin putting money into a home. However, I believe our current financial situation will pose a problem.

Financial background:

My father is 61 this year. About ten years ago he took over a golf business that had over a million dollars of debt and over the past few years and has now whittled it down to about $200k. However, the business has stagnated recently with the decline of golf and he is having trouble getting this debt off. Many golf businesses in the area have gone bankrupt and the debts have taken over these owner’s personal accounts as well. He fears the same will happen to him. If he sells the business the most he will get is $50k (this is generous), leaving over $150k debt. However my father doesn’t want to give up on this business yet so he’s trying his best to recover.

Last year my grandmother in Japan passed away leaving my father with roughly $180k in Japan. He plans on transferring this money over and splitting it to $80k between me and my brother. My brother is in university and is expected to graduate 2017. My mother currently has $100k in savings from our old house and my father doesn’t have any significant amount of money to go towards the home.

My credit score is 580. I made the mistake of not applying for credit cards as soon as possible and only just last month got a secured credit card with CapitalOne. I plan on using about $4 of it per month so that I can keep utilization low and build my credit gradually. I also have an unresolved T-mobile collection debt of $210 that I’m in the process of disputing and I don’t believe is valid. I would prefer to just pay it off but I’ve heard that paying it off does not always result in having the claim removed from credit reports so I’m trying debt validation first. And for whatever reason, the collection agency’s website returns a bad link when I try to pay it.

We don’t need a big home. I think a townhouse would be fine. Two bedrooms would be enough but it’d be nice if it was still in Irvine since we like this city and it’s close to my father’s business and my work. We’re quite happy in the apartment, but I feel like it’s a waste of money that I could be putting towards a home.

My questions:
Should we be looking for a house? If so, when should we start and how much should it cost? How does my father’s business affect this? Does the yen to usd conversion affect this? How much trouble is my family in?

I believe absolute worst case scenario is that the debt hits my family and we’re left with $60k overall right? ($100k + $160k - $200k) I guess after that I live paycheck to paycheck and provide for my parents? Honestly, I would really like for my father to retire at 65 but it doesn’t look like there’s any way that’s happening.

My father’s current plan is that we begin looking for a house in the next few months and put a big down payment on it so that the monthly payments are low. I will be the only one able to make payments on it since my father is working towards his business and my brother won’t be employed for at least two years.

Thank you so much for reading. I really don’t have any idea what I’m doing, so any help is immensely appreciated.

[safari]

Welcome to the forum! You're in the right place to ask any questions related to personal finance. If I understood you correctly, you're asking whether you could buy a townhouse in Irvine, CA when only making $45K a year because your parents won't be able to contribute anything toward the mortgage payments.

I am sorry to say, but this is unrealistic. The cheapest 2-bedroom townhouse in Irvine I could find is selling for $448K https://www.redfin.com/CA/Irvine/515...5/home/5552588while the rest of the properties are well above $500K. If your mother puts $100K down, you still have to finance $348K, which would require an income over $100K to even qualify for a loan. I am not even talking about your FICO score - 580 is very bad. If you had an excellent credit and were making over $100K a year, if you got a 30 year fixed mortgage for $348K at 3.75% APR, your mortgage payment would be $1,612 a month. But that's just mortgage. You'll need to add the HOA payment, which is $355 for that townhouse, plus property tax (~1.25% a year from the purchase price, or $5,600, so if you divide that by 12 months, it will be another $467). When you add those numbers up, your monthly payment will be $2,434. That's bare minimum, which doesn't include insurance and maintenance costs.

Also, I don't think you'd want to live with your parents forever. What will happen when you get married and have a family? My advice to you is to continue renting, but you won't be able to get a mortgage right now anyway with your salary and credit score, so it's a mute point. Just don't think of renting as throwing money away; many people have used that logic to buy a house they couldn't afford and they found themselves in a financial disaster.

[autoxer]

Last year my grandmother in Japan passed away leaving my father with roughly $180k in Japan. He plans on transferring this money over and splitting it to $80k between me and my brother. My brother is in university and is expected to graduate 2017.

I know your culture is different, but your father should consider keeping that money for his own retirement, instead of giving it away and expecting to be taken care of.

While buying a home might feel like a good achievement, I don't think it will help your situation.

The best thing you can do right now is practice living within your means, avoid debt and learn how to save. You can build good credit history without paying interest, make sure you pay off the credit card in full every month. If you don't have the money to pay off the card in full, then don't swipe it. Pretend like you have a mortgage payment and make the payment to your savings account every month. See how comfortable you are living on what's left.

[annamarie]

California is one of the most expensive city to live in.. while I admire your desire to help your parents get a new home,I would suggest you start saving first before diving into it. Cause you'll only end up with financial crisis. Settle firsts what needs to be settled, save more and when the time is right, you'll get it

[AnotherReader]

You cannot buy a home in your current circumstances. On paper, your father and mother have $330k in assets ($50k + $100k + $180k) and $200k in debt. To avoid bankruptcy if the business fails, he would have to pay the debts off with the $280k he would have remaining after the business fails. Your parents will not qualify for a loan and neither will you.

If he gives you kids the $160k, he would be unable to pay the debt if the business fails. He would have to file bankruptcy, and you might have to give the money back to pay the debt. While it is nice of your parents to do this, it does not help them.

In your shoes, I would wait until the business either improves or fails before thinking about a real estate purchase. In the meantime, I would fix your credit issues and let your brother finish his education. By that time, you will know more about the future of the business and he will be working. You can start saving and investing your income as well, so you are in a better position to help your parents.

[riverwed070707]

Agree with the others but I'm hung up on why anyone would take over a business with $1m in debt that was only worth $50k... has it depreciated that much or was it never a good investment?

[snafu]

Welcome to SA. As has been clearly stated, neither you nor parents can buy a home in CA. You might be able to better help parents in the future by tracking the best places for seniors to live in USA. Things change over 15 years and what is in the best interest of seniors isn't necessarily in CA. What [if any] benefits would they be eligible for in Japan?

More immediately, you might discuss your concerns with parents and look at every single expenditure. What costs can be lowered, what can be eliminated, where can you find savings, even tiny ones. Review rental and auto insurance, vehicle operation & maintenance, food costs, utilities, cut cable, etc. Examine any credit cards and interest rates if used. Use any reduction to create an emergency fund. Like riverwed, I don't understand your dad's business decision. Did he do it to buy himself a job?

[AlexM1359]

It's best your parents save their money for retirement, and you plan for your own future.