Author Topic: Hair is on fire, but want to buy a house  (Read 9719 times)

babysnowbyrd

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Hair is on fire, but want to buy a house
« on: January 09, 2016, 04:39:27 PM »
I don't know if my question really warrants a full budget breakdown.

Basically, I want to buy a house.

I have student loans to the tune of $27,000 and CC debt of $7500. No other debts. I make a fairly low wage of $10/hr.

I'm not keeping a solid budget. I'm mostly spending as little as possible while saving as much as possible. There may be some small leaks. Currently have saved about $1500.

Income is fairly low $10/hr 40 hrs/week. Currently looking for and have applied for higher wages jobs, but nothing new yet. I supplement my income driving for Uber/Lyft. Anywhere from $200-800 extra depending on how often I drive and demand. Halloween and New Years were major days and skew the average upwards.

I'm not looking to buy just ANY house. I'm looking for something with a basement apartment or mother in law suite to use as a primary residence/rental to subsidize the mortgage.

I'm currently squatting at my office because I can't stand wasting money on rent when I don't make much. A room share is about $400/month and I just refuse to pay that much.

My brother and I will be living in it together. Probably in the smaller unit while renting out the main unit. Brother is a felon, which makes housing difficult. He is also a disabled vet and going to school. Has a severely handicapped daughter who he splits custody with ex 50/50. Lives in a bachelor pad with some friends. His room is tiny, so he uses a pack n play for my niece to sleep in when she's over and uses a drawer in his dresser for her clothes and diapers etc. Brothers hair is also on fire from (useless) lawyer and clown truck payments.

I want to buy a house for several reasons:

I'll no longer be squatting.

My niece can have her own space (bed, dresser, toys, though she'll probably share a room with me.)

My brother and I can help each other out with sharing expenses and transportation.

We'll be able to share some responsibility and care for the kiddo on my brothers weeks: picking up/drop of from daycare, I can watch her while Bro is studying etc.

With renters we'd have to pay very little other than utilities and maintenance (Bro is a handy man). Without renters we can still pay the mortgage for our price range.

Well waste less food buying/cooking as a family instead of individually.

We can pay down our hair on fire debts. And then start saving for investments.

We both want to grow our own organic food and have chickens, so we'd be able to do that. (Not hipsters, farming is in the family, though our parents went away from it.) Bro wants cows and goats but not sure we'd get a big enough property for that yet.

I don't see many cons other than the fact I'm making minimal payments on my other debts while saving up for a house.

Of course picking a bad house could be a money sink, but that's what audits are for and Bro and Father are pretty good if not better than auditors at finding potential problems.

Others might worry about potential family conflict but Bro and I are good communicators and can talk clearly about expectations, concerns, what if scenarios etc. It helps we're both chill and not prone to drama.

Also because of custody situation, neither of us plan on moving from our current area any time soon.

Still stupid to buy a house though? I've obviously never bought one before.

« Last Edit: January 09, 2016, 11:58:24 PM by babysnowbyrd »

JAYSLOL

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Re: Hair is on fire, but want to buy a house
« Reply #1 on: January 09, 2016, 07:00:25 PM »
If it were me I wouldn't be buying a house with credit card/other debt and that salary.  Renting vs buying totally depends on the housing market where you are.  I can't buy a "crack shack" where I am for less than $300k, much less a house with a rental suite big enough for you and your brother/family.  What do places like that go for in your area?  What can you reasonably expect to get from a renter?  Have you looked into if you even qualify for a mortgage?  Can your brother be relied upon or are there more red-flags than already mentioned?
It's awesome to have goals and dreams, and this place good for getting advice and motivation to keep you focused on them.  I hope you can pull it off, but if I were in your shoes I would make that kind of jump from "a position of strength" as MMM would say. 

lbmustache

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Re: Hair is on fire, but want to buy a house
« Reply #2 on: January 09, 2016, 07:15:51 PM »
Yes, I agree with the above poster. Unfortunately to me your situation includes a lot of hypotheticals in order to work - some may fall to the wayside or never actually come to fruition ("we'll be able to...").

I would first tackle the loans and debt before taking on additional debt (which you say will allow you to somehow pay off your old debt and make investments???). If you are not currently renting, but can afford a mortgage or $400 in rent, are you putting that monthly amount towards... the CC debt? Loan? Savings?

Where do you live? For example $10/hr might be a little more okay in a LCOL area but for a HCOL not so much. I think that's minimum wage here in California, ha.


Frankies Girl

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Re: Hair is on fire, but want to buy a house
« Reply #3 on: January 09, 2016, 07:24:06 PM »
NopeNONONONOnOOOOOOOO.

You make too little, you don't have savings and you have lots of debt. Houses are money sinks. You are barely keeping your head above water right now, one little mess like a roof leak, furnace replacement or broken pipe that needs several hundred/thousand dollars worth of repairs, and you'd end up in a growing spiral of debt and could lose the house to boot. Even if your brother can do the labor involved, the materials might just be enough to break the bank if you even had any surplus in your budget.

And that's if you could even find a place that you could afford to buy, and a bank that would even approve a loan/mortgage for you based off your income and debt ratio. And you could afford the insurance and taxes. And it probably would be in a neighborhood that you'd not want to live in anyway.

I really think it would be a bad idea to buy a house. Get a better job. Make more money, pay off all of those debts, save up enough for an emergency fund and maybe once you have all that hashed out, then check out renting an apartment/house if you need your own place. Houses are not a great investment, and despite the idea that your brother could be a handyman, it probably would make much more sense to rent a reasonable apartment or house than it would to buy one for you right now. You would not be wasting money on rent if it works out to be a better deal for you to rent vs own.

Try a rent vs own calculator to see how you'd do: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0


MsPeacock

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Re: Hair is on fire, but want to buy a house
« Reply #4 on: January 09, 2016, 08:36:19 PM »
*If* you could buy a house, your plan would be good. However, you aren't in any sort of financial position to buy a house. Did you complete your degree? Can you get a better paying job? I would focus, as others have noted, on getting out of debt and getting an emergency fund built up. Once you accomplish that, work towards having a down payment. Achieving these things is years away. Honestly, I think it is very unlikely that you would qualify for any loan for a house right now. And, if you did qualify, I think it would be very difficult to realistically find a house that you could earn enough income on a tenant to pay the mortgage and pay for  upkeep of the house. Right now you have no spare income at all to even pay rent. If you have a $1000 mortgage payment, and a rental income of $500 for instance, you still have to cover repairs (I figure a minimum of 20% of the cost of the mortgage towards repairs in a typical month), the rest of the mortgage, and any times that you do not have a tenant.

It's nice that you want to help your brother. It sounds like you are both in tough positions - but you could share childcare and  help him out in a rental much more realistically than buying a house. I would suggest doing this *ONLY* if you brother is reliable in terms of his finances and can be counted on for his share of the bills.

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Re: Hair is on fire, but want to buy a house
« Reply #5 on: January 09, 2016, 09:39:14 PM »
What does a two bed apartment rent for in your area? Could you split that with brother until you get a better job? Or maybe a one bed with a living room that you could partition off for him. I think you'd need a huge down payment, and be in a lcol area and get rid of debt before buying a house.

babysnowbyrd

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Re: Hair is on fire, but want to buy a house
« Reply #6 on: January 09, 2016, 11:55:26 PM »
Wow, very strong feelings here! Here's a few more details to answer some questions:

More about Brother: had a young girl stalking him. Accuses him of rape and wins. Says to him after sentencing that she hopes they can still be friends. Wtf?? Bro goes to jail for something he didn't do, becomes very bitter and angry.

Gets out after a year, still angry. Can't get a job. Feels bad wife has been single parenting the last year and is still sole earner. Wife leaves him. We find out after that she cheated on him while he was overseas and in jail. Her family all like Bro and think wife made huge mistake. Some of her family even cut ties with her over the affair and regularly invite Bro over for dinner and family events.

Anyway, Bro is awesome person and hardworker whose life has been a series of unfortunate events. His been very angry and bitter and sometimes suicidal in the past, but is doing much better and is happier now.

As for home prices:

We're in a lcol area. In the last two months I've seen 4 homes with mil suites in our target budget range of $200,000. They are in older areas with smaller homes, but not "bad" or unsafe. We figure we can rent out a 2-bedroom unit for $800 based on average rents. Which is why it would increase our expenses if we were to do the renting instead. Brother currently rents his room for $300. Mortgage would seem to bee in the $700-1,000 range.

We have checked into mortgages, and it is a bit tough. Father was willing to cosign and help with downpayment, which is unusual for him. I think he'd like to have an "investment" like a rental unit. Would also like to see his daughter not squatting anymore and would like more security in housing for his son/granddaughter.

Bro is generally dependent on single friends for housing. Landlords aren't fond of renting to felons. First friend he lived with was army buddy who committed suicide. Friend's Ex sold the house but my brother wasn't able to stay there anyway. Moved in with another friend, but that one got married, and you know, three's a crowd. If life situations change with his current roommates his life will be turned upside down again. Bro is very independent and wants to have his own place.

There's also a small fear that someday Ex will try for sole custody of kiddo, and that she may use current housing situation as ammo.

At the time we started looking into qualifying for a mortgage, my monthly verifiable income was  $1500 though now its $1600. Bro gets $1500 from disability. Additional $800 from GI Bill, but lenders wouldn't count it. They also wouldn't consider my driving as income. (I looked back at my paystatements and I've averaged $800 per month in the last three months between driving for both companies.) I decided to start saving cash for a downpayment two months ago.

The plan is to try applying again a few months without needing Father at all, but we may still have to. Bro started a part time job while attending school which will increase his verifiable monthly income. He has also listed his clown truck for sale which will reduce his monthly payments by almost $500. I'm saving up as much cash as possible as quickly as possible for a downpayment, mostly from driving. As I said before, I'm also applying for better jobs to increase my verifiable income. Once I get a better paying job, I'll add in another verifiable part time job for even more. And I'll still Uber on weekends.

So that's what we're currently working on. We're not buying a house right this minute but are actively working to make it happen hopefully by summer.

babysnowbyrd

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Re: Hair is on fire, but want to buy a house
« Reply #7 on: January 10, 2016, 12:11:48 AM »
I would first tackle the loans and debt before taking on additional debt (which you say will allow you to somehow pay off your old debt and make investments???).

The idea is that saving on housing costs with a mortgage subsidized by renters would allow us to pay down debts faster. Then start saving funds for investments

Quote

 If you are not currently renting, but can afford a mortgage or $400 in rent, are you putting that monthly amount towards... the CC debt? Loan? Savings?

I was putting extra towards CC debt. I just applied for an income based repayment plan from my lenders. One lender put me in a temporary forbearance and the other one seems to be charging just interest. My payments currently are $16/month, so that frees up some budget space.

 But once I latched onto the home idea, I really kicked it up a notch with my driving and saving. It's been very motivating.

MsPeacock

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Re: Hair is on fire, but want to buy a house
« Reply #8 on: January 10, 2016, 04:27:59 AM »
Yes, your mortgage payment would be in the range you noted, but that does not include home insurance, property tax, PMI, and repairs/maintainence. I think you are significantly underestimating the costs of home ownership. You may have difficulty finding tenants if your brother is on a sex offender registry.

JAYSLOL

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Re: Hair is on fire, but want to buy a house
« Reply #9 on: January 10, 2016, 04:57:02 AM »

Anyway, Bro is awesome person and hardworker whose life has been a series of unfortunate events. His been very angry and bitter and sometimes suicidal in the past, but is doing much better and is happier now.


How can you be sure this trend won't continue?  I've know people like this, it usually continues


We're in a lcol area. In the last two months I've seen 4 homes with mil suites in our target budget range of $200,000. They are in older areas with smaller homes, but not "bad" or unsafe. We figure we can rent out a 2-bedroom unit for $800 based on average rents. Which is why it would increase our expenses if we were to do the renting instead. Brother currently rents his room for $300. Mortgage would seem to bee in the $700-1,000 range.


Holy shit, $200k insane with your income.  On paper, maybe everything looks like it works out neatly with your income, brothers and a renters right?  That ON PAPER.  What happens the first 3 month you own it and you don't have a renter yet?  What if you have a renter that fucks you?  What if you Brother has more "bad luck"?


I decided to start saving cash for a downpayment two months ago.


How much have you saved in 2 months then?  The fastest way to pay off you debts IS TO PAY OFF YOUR DEBTS, not save up for a huge cash downpayment on a $200k house.  You will have a much harder time paying off your debt with a house on top than your situation now.

Like i said in my first post, you have a goal and thats awesome.  You want to own a home and help your brother out, being able to do both would be great.  Please don't feel that everyone on here is attacking you goals or dreams, we just do the cold-hard math and risk evaluation.  My opinion is this is way too risky of a move for you.  If you had told me that decent houses with a suite go for $50k where you live, you had 100% faith in your brother, already had a tenant know and trust lined up for the suite @$800/mo AND had a min $5k emergency fund i might say go for it.  Short of that, its too risky for me.

I make more than double what you make, have Zero debt and even though i too would LOVE!!! to own my own place, I have no desire to have a $200k mortgage on top of my current expenses. 


« Last Edit: January 10, 2016, 05:06:36 AM by JAYSLOL »

Elisabeth

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Re: Hair is on fire, but want to buy a house
« Reply #10 on: January 10, 2016, 05:31:15 AM »
I'm sure you've read this classic post, but I think it's worth a re-read: http://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/

Honestly, even if you had ZERO debt, buying a house still would be a huge liability based on your current life situation and income level.

Your massive debt load (yes, it is MASSIVE, as a proportion of your income) makes prioritizing debt repayment a top priority.

It sounds to me that you are wanting to buy a house for emotional reasons as opposed to financial reasons.

It's great that you are focusing on trying to find a higher paying job(s) and focusing on saving a higher percentage of your income. I'd highly recommend continuing to focus on those goals instead of throwing another massive liability to your name.


lhamo

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Re: Hair is on fire, but want to buy a house
« Reply #11 on: January 10, 2016, 06:36:28 AM »
Agree with others that it is great that you are trying to sort out your financial situation and help your brother, but you are in no position to be buying a house on your own at the moment.  What you are proposing is a recipe for potential disaster. 

If your father is interested in getting into real estate investing, perhaps he could buy one of the houses you are looking at, rent out one unit at market rate and charge you/your brother a more modest rent while you get on your feet.  It would be in everyone's interests to have a clear contract for such rental and an understanding that if at any time you or your brother can't make rent, you lose the right to stay.  Do be aware, though, that as others have mentioned your brother's felony record as a sex offender (however unjust) is going to limit the marketability of any property where he is living. 

What are your options for improving your career opportunities/increasing your income?  The extra driving is great as a side business, but it is still going to be hard to make headway with your level of debt on a $10/hour income.  What skills and talents do you have that you could invest (time, not necessarily money) in developing further?

Again, I hope you don't feel we are trying to demotivate you.  But buying a house when you are already in a precarious financial position is NOT a good idea.  Clean up your current debts first, improve your income/career potential, and work toward a more solid foundation to build your future on.

spruce

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Re: Hair is on fire, but want to buy a house
« Reply #12 on: January 10, 2016, 06:36:56 AM »
Rent/mortgage and utilities generally shouldn't take up more than 30% of your income, that's a good metric to think about.

We paid $100,000 for our house, and our mortgage payments, including interest, taxes, and insurance are $634. We probably spend another $125 on utilities and maybe on average $100-200/month on home repairs. The mortgage is only a part of what homeownership will actually cost, and your $700-$1000 estimate seems very low for a $200,000 house.

In the short-term I'd suggest renting with your brother so you can have that supportive home for the both of you now, but you have time to sort out any living together kinks and save money for a down payment.

It sounds like you both have car payments - could you sell them and pay cash for something cheaper, thus eliminating that payment? I know Uber requires a new-ish car, but perhaps you could get a cheaper new-ish car.

Upping your income is clearly a priority, and you've made some good strides with that. If you want some thoughts on lowering your expenses, posting a case study may help. I also recommend using YNAB for budgeting and trying to reach savings goals - it has really helped me plug those leaks and up my savings rate.

I hope this is helpful and that in a few years you'll be in a good spot to buy the house you want.

babysnowbyrd

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Re: Hair is on fire, but want to buy a house
« Reply #13 on: January 10, 2016, 07:23:18 AM »
Wow, thanks for the responses, though they are hard to swallow.

Based on my calculations (from a calculator on the internet somewhere) my estimate did include pmi, taxes, insurance etc but maybe I should take a look again.

Did everyone get that my brother and I are going in on the house together? Right now before selling his truck or increasing my income we bring in $3500/month, not counting his GI bill or my driving. So if mortgage, PMI, taxes, insurance etc is around $1000/month then we're close to that $30% figure, right?

And if I can increase my income a few more dollars and even add a part time job then its even better, STILL not counting the GI bill or my driving.

I own an older model Prius and I take really good care of it. I also have a little Nissan (also paid for) my brother is already using, so he doesn't have to buy a car when the clown truck sells.

icemodeled

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Re: Hair is on fire, but want to buy a house
« Reply #14 on: January 10, 2016, 08:05:43 AM »
I think you will be able to manage fine if everything your counting on does happen (sharing expenses with brother and possible rental income). However, I think knocking out the credit card debt should be first priority as those probably have the higher interest. $10 an hour is not horrible where I live, so without knowing your area, I am not sure if this is good or bad if your more starting out. My husband and I made less starting out and bought a home with no financial struggle. We were debt free though and had about $10k saved up. Again I think it can be doable. I suggest getting rid of the credit card debt while trying to save what you can. Then, once that debt is gone build up your savings. Make sure to really know what the payment would be and if you can handle it. I had the lady who did my loan help figure that all up so I was certain.

lhamo

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Re: Hair is on fire, but want to buy a house
« Reply #15 on: January 10, 2016, 08:48:57 AM »
You seem hell bent on going forward with this.  It is your decision, and your risk to assume, but keep in mind these basic questions:

1)  You already have $34.5k in debt hanging over your head that you are having a hard time digging out of.  In spite of not having ANY housing costs at the moment. And your brother is only paying $300/month for his current housing.  Where, exactly, are you two going to scrounge up the money for your share of the mortgage given that you are both already living so close to the financial edge and not making headway? 

2)  You admit you don't keep a budget.  You don't really have a solid idea of where your money is going.  This makes it very difficult to believe any projections you make related to #1.

3)  You currently only earn $10/hour in your FT job, plus whatever you bring in with driving.  I am guessing that the FT job is probably low end administrative work (you mention squatting in your office, so I guess it isn't retail or food service at least).  How stable is it?  What would happen to your plan if you lost that job for some reason (e.g. illness or injury, or the business going under)?   What happens if you get in an accident with your car and can no longer use the driving to supplement your income?  Could you support the mortgage on a reduced unemployment or disability benefit?

4)  You mention your brother's GI bill benefits, but how long will those continue and what will you both do if he has trouble getting a good job after he is done with school?  The GI bill benefits will last at most 2-4 years, right?  Your mortgage is going to continue beyond that.  And how is care for his disabled daughter going to impact his ability to work full time? 

Again, I have no idea what your father's financial situation is, but it seems to me that the better option in this situation would be for him to be the real estate investor.  You simply are not in any position to be buying a house given your income and debt load. 

But if you do end up getting a mortgage please let us know, because if a bank is willing to finance a $200k mortgage to someone in your position I think that will be a sign that the economy is about to tank again. 

Please do think about/address the issue of what you are going to do to get your income up/improve your career prospects in both the near and distant future.  If you could move up to a job that pays better while still living on a bare bones budget, you could probably get your debts paid off in a couple of years and then be in a much better position to help yourself and your brother.

JLee

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Re: Hair is on fire, but want to buy a house
« Reply #16 on: January 10, 2016, 09:09:08 AM »
You can't afford it.

I bought a $140k house on a $40k income with ~$15k liquid/no unsecured debt and that was tight.  This is a nightmare waiting to happen.

Kris

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Re: Hair is on fire, but want to buy a house
« Reply #17 on: January 10, 2016, 09:14:10 AM »
Others have said why, so I'll just repeat this:

You are not in a position to buy. Pay off your debt.

You've come to this forum for advice. People who have successfully become financially independent, and who have evn retired early (in other words, people who are good with money) are giving you that advice.

The choice is yours, obviously. But this is a bad decision.

mozar

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Re: Hair is on fire, but want to buy a house
« Reply #18 on: January 10, 2016, 09:23:11 AM »
So a good rule of thumb is that  bank will approve you for 3 times your income. If you and your brother make 3500 a month, that's around 40k a year. You would qualify for a house for $126,000. Also you debt is more than your income. That directly affects your interest rate. Have you looked into what kind of interest rate you can get with the amount of debt you are in? If you only qualify for a high interest rate, your costs may be significantly more than what you are thinking.
Best bet seems to be a 2 bedroom with your brother where you pay $400 and he pays $400. You could always sleep on the couch and rent one of the bedrooms. Another suggestion is that if you can both easily put aside $500 a month then that's an indication that you can handle it.
With your brothers income it sounds like he could easily afford his own one bedroom, if he can find a landlord.

For your brother it sounds like he has a hard time figuring out who his friends are and who to trust. It's unfortunate that he was falsely accused of rape but what was he doing hanging out with that woman in the first place? It's really hard to get away from unhealthy people if its all you know.

JLee

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Re: Hair is on fire, but want to buy a house
« Reply #19 on: January 10, 2016, 09:36:20 AM »
So a good rule of thumb is that  bank will approve you for 3 times your income. If you and your brother make 3500 a month, that's around 40k a year. You would qualify for a house for $126,000. Also you debt is more than your income. That directly affects your interest rate. Have you looked into what kind of interest rate you can get with the amount of debt you are in? If you only qualify for a high interest rate, your costs may be significantly more than what you are thinking.
Best bet seems to be a 2 bedroom with your brother where you pay $400 and he pays $400. You could always sleep on the couch and rent one of the bedrooms. Another suggestion is that if you can both easily put aside $500 a month then that's an indication that you can handle it.
With your brothers income it sounds like he could easily afford his own one bedroom, if he can find a landlord.

For your brother it sounds like he has a hard time figuring out who his friends are and who to trust. It's unfortunate that he was falsely accused of rape but what was he doing hanging out with that woman in the first place? It's really hard to get away from unhealthy people if its all you know.

Some very generous math:
Taxes $800/year
Homeowners insurance $700/year
5% down (which he doesn't have)
Seller pays 100% of closing costs (highly unlikely)
Mortgage rate 4% (not sure on current rates or the OP's credit)
PMI at $98.17/mo

$190k over 30 years at 4% is $907.09. Add $223.17/mo for taxes, insurance and PMI and we are at $1130.26 plus utilities. Taxes could easily be triple that, putting us at $1263.59. If he has to get an unsecured loan for $10k to cover the minimum down payment (5%) for conventional financing, add that as well.  FHA used to have absurd (3-4x) PMI costs, but I think that's been adjusted so FHA may also be an option.

I would also be shocked if a lender would approve a mortgage at 10x the annual income of the applicant.

ReadySetMillionaire

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Re: Hair is on fire, but want to buy a house
« Reply #20 on: January 10, 2016, 09:40:41 AM »
OP: congrats on having goals and trying to get your shit in order. You're now ahead of a majority of Americans. That said, and I don't want to shit on your parade, but you simply can't afford a house for a while.

Other posters have given you a lot of good information, which I'll summarize as this: you are depending on too many assumptions for this to work.

Everything you mention isn't a certainty. Your brother's GI bill. Being able to rent out an apartment. Being able to have the dad co-sign. Being able to make money from Uber. Being able to get a higher income job.

Everything you say is a domino. And right now you have about 15 dominoes lined up against one another, and the only way buying a home is if every single thing goes right--your brother doesn't become reincarcerated, you're able to find a reliable tenant and rent an apartment, you're able to increase your income, your Uber income continues, your brother's GI benefits continue, etc.

If a single domino falls, you're screwed. There's just too many things that have to go right for this to work. And that's when you know you're in no position to buy a house.

Frugalman19

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Re: Hair is on fire, but want to buy a house
« Reply #21 on: January 10, 2016, 09:47:09 AM »
It seems like you have really good intentions and want to help your family. Which is awesome! But, you are a little out of touch with reality.
Nobody is going to rent a place from a sex offender, period. There are plenty of men out there that have been wrongfully accused of crimes like your brother. But they still can't live in certain areas or coach a little league team. It's just a messed up part of our system. I would check the local permitting and even see if he is allowed to be on title on the house if it's a rental.

You are in a bad place financially, focus on you for a few years, get your salary up and your debt paid off and then start looking into a house. I know you want to fix all your families issues, but you need to get your life straight first!

Stay strong! I have pretty much the same situation as you with my brother.

« Last Edit: January 10, 2016, 09:49:16 AM by Awgolfer »

lhamo

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Re: Hair is on fire, but want to buy a house
« Reply #22 on: January 10, 2016, 10:32:11 AM »
Again, I have no idea what your father's financial situation is, but it seems to me that the better option in this situation would be for him to be the real estate investor.  You simply are not in any position to be buying a house given your income and debt load. 

PS:  Think long and hard about this question:  Your father apparently has the resources to loan you money for the downpayment.  If so, why wouldn't he want to go ahead and buy the house himself, and let you guys rent from him?  If someone who is in a better financial place than you is not willing to assume the risk of having you, your brother, and some unspecified future tenant be the source for his future mortgage payments, why does it make sense for you -- someone in a  much more precarious financial situation -- to assume that risk?

aceyou

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Re: Hair is on fire, but want to buy a house
« Reply #23 on: January 10, 2016, 10:45:03 AM »
I really hope you take the advice posters are giving you.  This is a good community.  Most everyone knows their stuff, and they have your best interests in mind. 

Here's my two cents:

The PMI + interest on the main loan +property taxes + maintenance for house will greatly exceed the $400 you feel you are throwing away in rent(you are not throwing that money away FWIW, you have to live somewhere). 

Also, the house will actually HINDER your ability to increase your income.  Your priority #1 is bringing in more money and throwing 100% of it at your debt and increasing savings.  You need to be mobile enough to move to opportunities, wherever they may be.  So, getting a house will slow your ability to make more money, while at the same time putting you even further into debt. 

Good luck!!!

MayDay

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Re: Hair is on fire, but want to buy a house
« Reply #24 on: January 10, 2016, 11:10:01 AM »
When I first read your OP, I thought OK, that is reasonable. 

Then I saw you were looking at a 200K house. 

NONONONONONONO.

It isn't a bad idea, and go you for saving up a DP!  Keep that up by all means!  But you definitely have to improve your income as well, because as others have mentioned, houses have super expensive unexpected expenses.  Like new roofs- shingles cost money even if your brother can put it on.  Or new water heaters.  Or new refrigerators.  The list goes on.  This stuff WILL happen and you have to assume it will happen the week after you move in. 

So you would need 40K for a DP, ~3-4K closing costs, 10K at least in an e-fund for house emergencies, plus say 6 months rent in case you don't have a tenant, so lets say another 5k for that. 

By the time you have 58K saved up between you and your brother, you ought to have gotten better jobs or raises, and at that point you may very well have a high enough income and enough money saved to be ready to buy. 

Now if you want to look at a less than 20% DP, then your mortgage will be higher.  We recently sold a similarly prices house and our payment was 1490 a month.  That was with high-ish property taxes, but your monthly payment could be similar.   

In the meantime, can your brother and you rent a 1 or 2 bedroom apartment together?  Does your dad live in town?  If so, would he let you remodel his basement to have a apartment in the basement that you could rent from him for cheap?  Could you park an RV in his yard?  I am all for creative and frugal housing ideas, you should explore different options that you can implement now while you save to buy a house in a few years. 

Rezdent

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Re: Hair is on fire, but want to buy a house
« Reply #25 on: January 10, 2016, 11:49:08 AM »
I agree with the others that buying a house right now is a bad idea.
Honestly you are admitting to "squatting".  Another word for that is "homeless".

Once upon a time I was also homeless (with a small child).  I dug out of that hole, maybe this story might be useful so here's what I did:

I bought a used travel trailer and lived in a trailer park with my kid.  Lot rent and utilities were much lower than renting an apartment.
I did not have a car.at.all.  I used public transportation or walked.  Once, I needed to move my trailer to a different park (lower lot rent), so I hired a wrecker to move it.  Problem solved.
Would I have preferred a house with a suite to rent out and a yard, and a picket fence?  Oh yeah.  And a garden, I wanted a garden...

Fast forward....by age 28 I owned a beautiful 4BR home outright (and sold the trailed for more than I paid for it) - and people called me lucky.

Fuzz

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Re: Hair is on fire, but want to buy a house
« Reply #26 on: January 10, 2016, 04:37:14 PM »
I don't think it matters. You can't buy a house because no one will lend you enough money to buy a house, and you don't have enough for a downpayment.

MrsPete

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Re: Hair is on fire, but want to buy a house
« Reply #27 on: January 10, 2016, 07:40:53 PM »
Nope, you're not ready.  Work towards finding a better-paying job (and/or a second job), get rid of the debt, save a downpayment ... then think about houses.  If you move forward at this point (which is probably impossible), you're going to end with a high interest rate and you'll probably lose the house.

Owning a house is wonderful -- but you have to be ready.

little_brown_dog

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Re: Hair is on fire, but want to buy a house
« Reply #28 on: January 10, 2016, 08:34:40 PM »
Not a big point but worth mentioning: if your budget it already tight, raising your own food is probably a bad idea right now. It is a huge misconception that producing your own eggs and dairy will cost less than in the store. At best you'll break even cost wise. Most likely the costs of housing and feeding the animals will mean you pay more than just buying eggs at the store. Even free range birds need supplemental feed, oyster shell, etc. I speak as someone who does have a small flock at home. Great hobby, pretty crappy financial investment. Home dairying is even less cost effective.

LeRainDrop

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Re: Hair is on fire, but want to buy a house
« Reply #29 on: January 10, 2016, 09:22:44 PM »
Keeping this short, I echo the others who admire your drive and desire to help your brother, but believe your financial position is so far away from being able to afford this.  You truly are underestimating the costs of homeownership (JLee's calculations are spot on).  I like how ReadySetMillionaire described your plan as a series of dominoes, all of which would have to align perfectly to make this work, and otherwise you'd wind up drowning.  My advice to you would be to keep tackling your debt as quickly as possible (which forbearance is not).  Also, aren't you concerned that if your employer discovers that you are squatting in the office, they will fire you?

ETA:  Also, didn't your Prius just age out of Uber eligibility?  I saw you posted elsewhere that it's a 2005 vehicle, but now that it's 2016, Uber requires 2006 or newer for everywhere except LA, Orange County, and San Francisco, right?
« Last Edit: January 10, 2016, 11:10:57 PM by LeRainDrop »

Travis

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Re: Hair is on fire, but want to buy a house
« Reply #30 on: January 10, 2016, 09:50:10 PM »
Probably beating a dead horse by this point, but your plan is to buy a house of cards.  All of your calculations for affording a house require renters, stable income from someone with an unstable life, charity from your parents, and absolutely nothing bad happening in any facet of your lives.  It can't happen.  Have you consulted with a bank about any of this math?  At $10/hr full time, your credit card debt alone is 30% of your GROSS income.  Student loan included it's over 100%.  What is your credit score?  Your Uber income probably won't be counted unless Uber is issuing W2s.  Your brother's GI Bill is only good for up to 4 years.  You're talking about putting yourself on the hook for a 30 year mortgage.  Assuming you get a loan, your own generous math requires continuous financial support from outside sources.  There's an expression somewhere out there of how hyper-aware landlords are about how many months are in a year, because if a property is occupied for all 12 it's a really great year.  Assume you don't have a renter for 3-6 months, how do the numbers look?  Your brother drops out of school or best-case he's simply used up all his GI Bill benefit - how do the numbers look? A $1000 repair pops up on this house, how do the numbers look?  Bottom line: if you can't handle this house on your own by even the slimmest margin you're asking for disaster.

okits

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Re: Hair is on fire, but want to buy a house
« Reply #31 on: January 10, 2016, 10:53:23 PM »
Wow, thanks for the responses, though they are hard to swallow.

There have been a lot of thoughtful, detailed responses to your post.  Though the responses are hard to swallow, please bear in mind that everyone who took the time to write one wants to see you succeed.  The writers have given you their honest assessment of that happening with your immediate-term plan.

Your house purchase can be a longer-term goal once you make more financial progress and are in a better position to afford the costs (and risk) of home ownership.  "Not right now" isn't the same as "never".

babysnowbyrd

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Re: Hair is on fire, but want to buy a house
« Reply #32 on: January 11, 2016, 12:59:55 AM »
Thanks everyone for posting!

It was a hard pill to swallow but I read you guys loud and clear. It really was great to see my financial situation through much more objective (and vocal) lenses. I have to admit it was (and still is tbh) really depressing to see my situation so clearly. I was feeling pretty down and hopeless although I'm coming out of it now. Sometimes you need to be knocked off your pedestal.

So these are my plans going forward:

I've cut up my credit cards, which is something I should have done long before but just couldn't bring myself to do. They're relatively newly issued (fancy chip and all) so the numbers aren't saved on any sites like amazon or ebay where I could still purchase crap on them. I can still transfer from my bank so I'll just have to watch that.

I'm going to keep my saved up money as an emergency fund to keep from "needing" the CC cards. From here on out I'll pay the CC's first.

I have a mint account, so I'm going through and playing "catch up" with categorizing my past transactions etc to see where everything is going and plug up any leaks.

I'm also looking for better employment, which is the most important, and also the hardest. My resume is kind of all over the place and I'm almost 30. I've usually taken the first job I could get in any field and I still don't have a specific plan. I have a degree but the subject matter is broad and I never quite figured out where exactly I wanted to go with it. If I did it probably wouldn't be in a sector that pays well. My strength is that I do quite well in person for interviews and the like, but my confidence has taken a real nose dive in the past few months, so it's harder to sell myself. If I can manage getting an interview for a different job, I'm sure I could muster up some courage and pull together some stray pieces of confidence to present myself with.

There's a good chance that I could land a decent-paying job somewhere else in the country, but I don't want to do that again. My niece is doing better now, but she's had a lot to deal with already in her short little life, and when I was away I would get worried every time she ended up in the hospital that I'd never see her again and while I made more in that job than any I've ever had it would have seemed really hollow if I lost my niece in the middle of it. She's just a very sweet child and the source of the purest form of love in my life so I'd rather just stay here even if it means low wages, although admittedly, it doesn't have to be $10/hr.

Since losing my last job, I've really come to value my time and flexibility and I don't want a job that I have to give up my life for. I show up, do the job, and go home. I was initially ok with my current job because it's a graveyard shift, so I feel like I'm hacking the system by getting a full 40-hr/week job with benefits without conflicting with any daytime activity. I like that I can drop my niece off at daycare and pick her up. I like that I can babysit her at the drop of a hat if a crisis comes up for either her mom or dad. I feel like I have more energy and get more things done in a day. I can take the first time slot available when scheduling doc/dentist/auto repair appointments without needing to shuffle hours or switch shifts or lose hours for it. I can visit businesses during their open hours.

There are some better-paying graveyard jobs I'm going to start applying for right now. Once pays $15/hr and the other is $13/hr +commissions. It's a start, and the likelihood of advancement is higher for those jobs than my current one.

I guess I'm struggling like many other users on this forum to find life enjoyment and decent pay in a job while deciding what needs to a priority and what needs to give.

This may sound whiny, but it's a genuine concern: I sometimes worry I'm pathologically incompetent and will never get my act straight, though I do try. I make small gains that I never would have if I hadn't tried but then make stupid decisions (they never seem stupid at the time though, of course) that eat those gains and sometime put me further behind financially.

lhamo

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Re: Hair is on fire, but want to buy a house
« Reply #33 on: January 11, 2016, 07:29:10 AM »
Hey,

Congratulations on recognizing buying a house is not the best solution to your problem right now.  That is a big step.  It is hard to step down from dream land back into reality sometimes, but it is important to try to keep yourself grounded, while not ending up in a puddle on the floor. 

Definitely apply for those higher paying jobs -- a boost to $13-15/hour would be a 30-50% increase in your base pay!  You don't have to take them, but you should definitely apply.  Even getting an interview (much less an offer) might really help in terms of your self-esteem.

I looked back at your journal, looks like you have been through a lot in the last year.  Assume the RV and the oil and gas job are both gone at this point?  What are you doing now?  And what have you done in the past?  Having a better idea of what your job history/skill set is might help us brainstorm different options for you career-wise.  I didn't look back through your other posts, but am I right in remembering that the current job is an overnight audit position at a hotel or something?  If you have a background in finance work and enjoy it, you can use the quiet time to study for different certifications (or maybe even another degree, assuming you can do it cheap through something like Western Governor's University) in order to get some traction careerwise.  Another possibility would be to move into something like healthcare, which tends to pay decently and also offers opportunities for graveyard, swing shift, and part time (or full time with lots of time off between options).  Healthcare can be really interesting for an anthro-type person, too -- SOOOOO many different people to deal with/try to figure out, both as colleagues and as patients. 

Hang in there and keep coming back.  You might want to revive your journal.  Many of us are documenting our struggles over in the journals, and the feedback tends to be really helpful (though you do have to be open to being slapped upside the head for idiocy or bullheadedness when you demonstrate it). 


ooeei

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Re: Hair is on fire, but want to buy a house
« Reply #34 on: January 11, 2016, 07:40:39 AM »
Thanks everyone for posting!

It was a hard pill to swallow but I read you guys loud and clear. It really was great to see my financial situation through much more objective (and vocal) lenses. I have to admit it was (and still is tbh) really depressing to see my situation so clearly. I was feeling pretty down and hopeless although I'm coming out of it now. Sometimes you need to be knocked off your pedestal.

So these are my plans going forward:

I've cut up my credit cards, which is something I should have done long before but just couldn't bring myself to do. They're relatively newly issued (fancy chip and all) so the numbers aren't saved on any sites like amazon or ebay where I could still purchase crap on them. I can still transfer from my bank so I'll just have to watch that.

I'm going to keep my saved up money as an emergency fund to keep from "needing" the CC cards. From here on out I'll pay the CC's first.

I have a mint account, so I'm going through and playing "catch up" with categorizing my past transactions etc to see where everything is going and plug up any leaks.

I'm also looking for better employment, which is the most important, and also the hardest. My resume is kind of all over the place and I'm almost 30. I've usually taken the first job I could get in any field and I still don't have a specific plan. I have a degree but the subject matter is broad and I never quite figured out where exactly I wanted to go with it. If I did it probably wouldn't be in a sector that pays well. My strength is that I do quite well in person for interviews and the like, but my confidence has taken a real nose dive in the past few months, so it's harder to sell myself. If I can manage getting an interview for a different job, I'm sure I could muster up some courage and pull together some stray pieces of confidence to present myself with.

There's a good chance that I could land a decent-paying job somewhere else in the country, but I don't want to do that again. My niece is doing better now, but she's had a lot to deal with already in her short little life, and when I was away I would get worried every time she ended up in the hospital that I'd never see her again and while I made more in that job than any I've ever had it would have seemed really hollow if I lost my niece in the middle of it. She's just a very sweet child and the source of the purest form of love in my life so I'd rather just stay here even if it means low wages, although admittedly, it doesn't have to be $10/hr.

Since losing my last job, I've really come to value my time and flexibility and I don't want a job that I have to give up my life for. I show up, do the job, and go home. I was initially ok with my current job because it's a graveyard shift, so I feel like I'm hacking the system by getting a full 40-hr/week job with benefits without conflicting with any daytime activity. I like that I can drop my niece off at daycare and pick her up. I like that I can babysit her at the drop of a hat if a crisis comes up for either her mom or dad. I feel like I have more energy and get more things done in a day. I can take the first time slot available when scheduling doc/dentist/auto repair appointments without needing to shuffle hours or switch shifts or lose hours for it. I can visit businesses during their open hours.

There are some better-paying graveyard jobs I'm going to start applying for right now. Once pays $15/hr and the other is $13/hr +commissions. It's a start, and the likelihood of advancement is higher for those jobs than my current one.

I guess I'm struggling like many other users on this forum to find life enjoyment and decent pay in a job while deciding what needs to a priority and what needs to give.

This may sound whiny, but it's a genuine concern: I sometimes worry I'm pathologically incompetent and will never get my act straight, though I do try. I make small gains that I never would have if I hadn't tried but then make stupid decisions (they never seem stupid at the time though, of course) that eat those gains and sometime put me further behind financially.

Just read this whole thread, and am very surprised at this.  For the first few posts I was sure you were going to tell everyone to buzz off and that you were going to make it work, and we should follow our dreams or something like that.  I'm pleasantly surprised to see that you recognized genuine advice even though it went against everything you hoped/wanted. That alone bodes well for your future, as many people can't listen to advice they don't want to hear no matter how much sense it makes. If you hang out here and listen to what some of the (very successful) posters have to say, you've got a fighting chance at getting that house one day.

Something that I didn't see anyone mention is that renting and buying are both "throwing money away," (in exchange for a place to live...) just with buying you're also saving a little bit.  For the first few years of a 200k loan at 4% you are paying about 700/month in interest (and more in taxes and insurance), and only about 300/month is going toward principal.  If you find an apartment with your brother for 800 and put 500 a month in a savings account, you're most likely doing better financially than you would buying the house.  Plus with renting you don't have to worry about a $5000 repair popping up. 

Best of luck to you, I look forward to you posting a success story someday linking back to this thread!

ohana

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Re: Hair is on fire, but want to buy a house
« Reply #35 on: January 11, 2016, 07:46:30 AM »
Great job on your serious start.

I agree, get a better job.  If need be, think about getting a certificate or two-year degree that gives you actual marketable skills.  You need way more income to get ahead.

Pay down your CC bills first.  Then I would start simultaneously paying down my student loans and saving for a down payment.  At a minimum, you need 10%, but 20% would be better.  I know Dad could lend you that, but a loan like that is just MORE DEBT.  You don't need any more.  Once you have a down payment, hold off on buying until you have a small emergency fund -- like 3 months ($10k).  Consider refinancing your student loans, if you can get a lower rate.

Turning 30 isn't late.  You have plenty of time to get on track.  I can see you want to get things together, and that's a powerful motivator.  Good luck, and you are being a great sibling to your brother.  He is blessed

lhamo

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Re: Hair is on fire, but want to buy a house
« Reply #36 on: January 11, 2016, 07:55:15 AM »
Another thought:

You mention Dave Ramsey  in your journal.  Listening to his podcasts might be good motivation/support as you work through this.  I find them motivational and i'm not even in debt (except for a mortgage that we could pay off if we liquidated other assets).  You might also consider calling in to his show and seeing if he might offer to put you/your brother through Financial Peace University.  I think he'd be sympathetic to your story and your attempts to get back on your feet.  He often gifts Financial Peace to people in your situation.  Connecting with other people in that context might also help you feel more supportive, and maybe even lead to job opportunities.  Not sure if it is feasible with the graveyard shift, but maybe worth a try.

GrowingTheGreen

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Re: Hair is on fire, but want to buy a house
« Reply #37 on: January 11, 2016, 07:57:00 AM »
Another person jumping on the "you're not ready for buying a house, yet" bandwagon.

You need to be in a stable pace before buying a house. No CC debt, an emergency fund, and the ability to stick to a budget are a bare minimum.

Your idea of the roommates is a fantastic idea. I've got a buddy that does this and is a quick way to become a landlord while minimizing your housing costs. Get yourself squared away first before buying. Owning a house is expensive!

It seems as though you've got the motivation, so start now! If you work on your debt, start budgeting, and maybe get a side hustle going, there's no reason why you can't be buying a house in 1-2 years.


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ReadySetMillionaire

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Re: Hair is on fire, but want to buy a house
« Reply #38 on: January 11, 2016, 09:10:28 AM »
This may sound whiny, but it's a genuine concern: I sometimes worry I'm pathologically incompetent and will never get my act straight, though I do try. I make small gains that I never would have if I hadn't tried but then make stupid decisions (they never seem stupid at the time though, of course) that eat those gains and sometime put me further behind financially.

I'd say 90% of people feel this way. I do both personally and professionally.

Personally, I lost $400 gambling last year. I caved and made a couple expensive but unnecessary purchases. I ate healthy for a while and then caved to my normal habits and actually gained weight last year.

Professionally, you can go through my post history and see my stress as a young lawyer. I'm constantly making mistakes. This very morning I had to go to a partner's office because I miscounted the days for a deadline--I literally just read the docket wrong and now we filed our motions two days late. I seem to be always making these kinds of small mistakes and it kills me.

All that said, I'll introduce you to one of my favorite Reddit posts of all time: "No More Zero Days." It's what's in my tagline. Read the entire thing here: https://www.reddit.com/r/getdisciplined/comments/1q96b5/i_just_dont_care_about_myself/cdah4af

The point of it is simple: do something every day to accomplish your goals. I'm trying to lose weight this year. No zero days. That means if I haven't worked out that day to go in the basement and do 50 pushups and 500 jumping jacks.

Applying this to your scenario, do something every day to get your financial situation right. Set up a budget one day. Organize a week's worth of expenses on Mint. Don't buy anything out. Make a grocery list to cut your costs. Reduce your cell phone plan. Cut cable. Fill out that application for a second part time job. Something. Something every day to get you closer to your goal.

The compound effect of your actions will eventually lead you to your goals.

So pick your head up. No more zero days from here on out. You'll be able to buy that house eventually.

« Last Edit: January 11, 2016, 09:26:21 AM by ReadySetMillionaire »

humbleMouse

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Re: Hair is on fire, but want to buy a house
« Reply #39 on: January 11, 2016, 09:45:31 AM »
Lots of good responses from other posters.  I would just add that you claim to live in a LCOL area, which in my mind means that you should be able to find something for under 100k if you really want to buy, 

In Minneapolis there are a plethora of houses in different neighborhoods for under 100k.  I consider Minneapolis very LCOL.

If you look at the new FNMA lending practices it is clear we are in another housing bubble.  If you actually decide to try to get approved for a loan and buy something, get a cheap house under 100k so you don't go underwater after this bubble pops.

LeRainDrop

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Re: Hair is on fire, but want to buy a house
« Reply #40 on: January 11, 2016, 11:08:54 AM »
This may sound whiny, but it's a genuine concern: I sometimes worry I'm pathologically incompetent and will never get my act straight, though I do try. I make small gains that I never would have if I hadn't tried but then make stupid decisions (they never seem stupid at the time though, of course) that eat those gains and sometime put me further behind financially.

I'd say 90% of people feel this way. I do both personally and professionally. . . .

All that said, I'll introduce you to one of my favorite Reddit posts of all time: "No More Zero Days." It's what's in my tagline. Read the entire thing here: https://www.reddit.com/r/getdisciplined/comments/1q96b5/i_just_dont_care_about_myself/cdah4af

The point of it is simple: do something every day to accomplish your goals. I'm trying to lose weight this year. No zero days. That means if I haven't worked out that day to go in the basement and do 50 pushups and 500 jumping jacks. . . .

The compound effect of your actions will eventually lead you to your goals.

So pick your head up. No more zero days from here on out. You'll be able to buy that house eventually.

Yeah, count me as someone who sometimes feels that way, too.  ReadySetMillionaire, thank you so much for posting that reference.  I really like the concept how you described it.  I'm going to read through.

Bracken_Joy

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Re: Hair is on fire, but want to buy a house
« Reply #41 on: January 11, 2016, 05:50:23 PM »
Following. This is actually a really motivating thread I feel like- it isn't just "this dream isn't doable right now", its "so how can we get you there?". Love this community.

Villanelle

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Re: Hair is on fire, but want to buy a house
« Reply #42 on: January 11, 2016, 07:01:57 PM »
I don't know how long your brother has been going to school on the GI Bill, but do keep in mind the time limits (39 months, IIRC, regardless of how many units are taken at a time), and also remember that he won't get the housing allowance during breaks. That trips up a lot of people.  If he is out of school for 2 weeks during Spring Break, he doesn't get paid the BAH for those 2 weeks, for example. 

Beyond that, it seems that you do have a good attitude and are willing to be realistic and to exercise restraint, and I think that will take you far.