Author Topic: Next steps for frugal, divorcing renter with limited income  (Read 3936 times)

gbbkln

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Next steps for frugal, divorcing renter with limited income
« on: August 11, 2013, 07:55:47 PM »
Mustachians, please show me the way!

My basic question is if and or when I should consider purchasing a home rather than renting, but I'm open to any advice you can throw at me.

Stats: 36, about to divorce, 1 8 year old, 1 dog, 1 cat, live in SoCal.

Income and assets: I just signed the papers on a $52K/year job; I get $7.8K/yr in child support. I own almost nothing of value. I have a couple thousand in a pension from 5 years of teaching. I've already gotten too much help from family over the years, and they don't have much to give anyway. I have no savings.

Debts and expenses: I'm anti-consumerist and frugal. I'm not exactly sure what my monthly expenses will be now, but minus housing, let's call it $1000. I don't have any debts.

My husband and I have been renting (he pays the rent). We had planned to buy a house when I got a job. I've never owned a house before. But now I do want to buy a house in my city for the following reasons:
1) I love this city. It's beautiful, low crime, high community involvement, walkable, not too far from my job by SoCal standards (25-30 minutes).
2) I want some stability for my kid (and myself!). Just 2 years ago, I moved us 2000 miles away from the dad to live with my husband, STBX. It's bad enough that I'm divorcing again. I don't want to move again.
3) I want a house so that I can start building a little urban homestead, with a garden, backyard chickens, etc...
4) I don't want to give up my dog and cat, and my cat has refused to live indoors since we moved here and added the dog. (Don't worry, PETA, she's safe, healthy, and cared for.) For them, my kid, and reason #3, I'd like to have some reasonably secluded land.

HOWEVER:
1) I used an online mortgage calculator that said I could afford a house just under $200K. I don't think those existed here even at the lowest point of the recession, and prices are rising. I'd be lucky to find one for $300K. Especially if I want some land and want to avoid living too close to the highway.
2) I don't even know what kind of mortgage I could get. My credit's OK, but it's not super high. They'd probably want me to be working in my job for a while. And although $52K is more money than I've ever made before, it's not a lot for a household income, especially where I live.

I really do want to start building a 'stash. I think I've got the whole "don't spend a lot" part down, and now I'll have some income. I have next to no experience with investing, either in the stock market or in real estate. There are some houses for rent in my city, for about $1500 a month. At the moment, I'll take over the rent for our current apartment. But what should I do next?

smedleyb

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Re: Next steps for frugal, divorcing renter with limited income
« Reply #1 on: August 11, 2013, 09:58:26 PM »
Even though I just met you, I would surmise that you are not financially or emotionally ready to buy a house.  I say rent for a year (find the best and most economical living situation until then, which may mean seeking out another apartment) and then reapproach the house question, hopefully this time with a wad of cash to use at a down payment. 

Frugality is only half the battle around here.  Building up an investment kitty is the other, and perhaps the most important, half.

Good luck, stay strong, and do indeed focus on building your stache. 

Zamboni

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Re: Next steps for frugal, divorcing renter with limited income
« Reply #2 on: August 12, 2013, 01:23:26 AM »
Hang in there:  things will get better!  I admire your spirit and your planning.

Please remember that keeping the dog and cat and staying where you are will provide a measure of stability for your child.  With parents splitting, this is very valuable.  You don't have to stay there forever, but a year or two more there is probably a good idea just from that standpoint.  Your child probably feels comfortable in your current neighborhood (doesn't worry about getting lost, for example) and also likely has some friends who are neighbors, and keeping those ties is key right now. 

I was right where you are not that long ago but without the benefit of the child support.  Do you track all of your expenses somehow (mint, YNAB, excel?)  First focus on just carefully tracking where the money is going and getting through the first year of divorce with no debt.  Even though you are naturally frugal, get into that habit and you will find some areas to pretty painlessly optimize.  Build savings as you can, of course.  Write down some financial goals. 

Please consider giving it a year or two or three before moving.  With no savings, it's doubtful that you will be able to qualify for a mortgage bc lenders are now generally looking for 10% down (plus there are closing costs.)  You will have money in the bank in a year or two or three, and at that point you can think about either moving to rent a house that fits your desires or you can contact a mortgage lender to see what you could qualify to buy.  Be wary of becoming "house poor!" and please don't rush into anything.  Focus on your health and wellness, your son, and your finances for at least a year before making more changes. 

gbbkln

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Re: Next steps for frugal, divorcing renter with limited income
« Reply #3 on: August 12, 2013, 09:06:59 AM »
Thanks, zamboni and smedlyb. Honestly, I couldn't see how it would be possible to buy a house, but because houses are considered such a good investment and because rental prices are high, I wondered if I were missing something. And many mustachioed heads are better than one.

Next step, Savings Town! :)

jrs

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Re: Next steps for frugal, divorcing renter with limited income
« Reply #4 on: August 12, 2013, 05:36:13 PM »
...about to divorce...

It goes without saying, if you decided to buy, don't do so until divorce paperwork is final...

skyler

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Re: Next steps for frugal, divorcing renter with limited income
« Reply #5 on: August 12, 2013, 06:34:43 PM »
I agree that you should not make big decisions right away. They say it's true in case of a loss (a loved one ) or a divorce...
Best wishes to you!

ChiStache

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Re: Next steps for frugal, divorcing renter with limited income
« Reply #6 on: August 12, 2013, 06:53:06 PM »
Since you just started a new job, make sure to take advantage of any employer sponsored retirement savings. In addition to saving for a house, you gotta catch up on retirement.

Shooting my optimism gun your way! Go forth and prosper!
« Last Edit: August 13, 2013, 06:28:20 AM by ChiStache »

Eric

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Re: Next steps for frugal, divorcing renter with limited income
« Reply #7 on: August 13, 2013, 12:39:13 AM »
Thanks, zamboni and smedlyb. Honestly, I couldn't see how it would be possible to buy a house, but because houses are considered such a good investment and because rental prices are high, I wondered if I were missing something. And many mustachioed heads are better than one.

Next step, Savings Town! :)

I think you should read this before you get all googly-eyed over owing a house.

http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

There's nothing wrong with renting, especially when real estate is so expensive in your area.  I know.  I'm in the SF Bay Area.  I can't afford to buy anything either.  And yet I'm still in position to (hopefully) be able to retire in about 7 years.  Renting can easily be your best financial option.  I know it's mine.