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Thread: Two major purchases in the next two years...ish?

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    Default Two major purchases in the next two years...ish?

    I am currently working on eliminating all of my debt ($10k total including student loans), and then I will be interested in making two major purchases: a car and a house. I opened several lines of credit within the last two years (four), and I opened the last one in January of this year. I will not be opening any further lines of credit in hopes to improve my credit report. I make all of my payments on time, and my credit availability was recently increased by $400 on one card, $200 on another, and by $1,500 on another, so I think that's a good sign..?

    I imagine that your debt-to-income ratio is a big factor with car loans and mortgages, so my question is: if I eliminate my other monthly debts (the $10k total), how much of an issue will it be for me to want to take out a car loan and a mortgage at the same time?

    Other details, if needed:
    My current car is paid off, bought new in 2006, has about 70k miles on it, and I'm wanting to get rid of it because it has been having a lot of small- to medium-sized issues cropping up since day one, and I am afraid shit is just going to rain down on me with it one day soon.
    I have been renting since January 2012 and have not had any issues paying my rent or other landlord complaints.
    My boyfriend, with whom I would likely be buying the house, is about to pay off his car within the next few months and has no other debt besides about $10k in student loans. He is not as vigilant about paying his bills on time, so he has set up auto pay with what he can, and I just pay the rest of his shit online. He does not have many lines of credit (two, I think). (We are planning to get our credit reports about one or two months after I pay off all of my debt to see where that takes us.)
    Combined, we make $100k/year gross in salaries.
    I have a job outside of the industry with steady pay that I have been at for six months and intend to stay at. He has been at his job for almost a year.

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    Default Re: Two major purchases in the next two years...ish?

    28/35


    28 percent of your gross income towards principle interest and taxes[and PMI if required]

    .35 total indebtedness

    So with a 100k income, 28k towards p/i/t or 2300 a month. 580 a month toward all other loans.



    So if the house is a real possibility, I would suggest you do the house first, put your 'car payment' towards repairs in the mean time.

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    Default Re: Two major purchases in the next two years...ish?

    Is the monthly cost of car repairs more than the cost of a car payment?

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    Default Re: Two major purchases in the next two years...ish?

    ^No, assuming it doesn't like... explode or something. My boyfriend's mother works at a high school that has an auto tech program, and I have been able to have the students and teacher (owned a shop for like 20 years) tend to the most recent minor issues for free.

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    Default Re: Two major purchases in the next two years...ish?

    OK, time for the inconvenient questions ...

    Do you have two years worth of pay stubs / tax returns which show something close to your present level of income ? While certain auto lenders may allow you to slide on the issue of income verification, mortgage lenders probably will not.

    Do you and your BF have 25% of the purchase price of a house saved up to cover a down payment plus closing costs ? 'Affordable' mortgage lenders aren't going to let this slide either ... although 'subprime' mortgage lenders might ( in exchange for a significantly higher interest rate plus additional insurance costs ).

    Assuming that the answer is 'no' on both counts, realistically speaking you're probably going to wind up renting for another couple of years at least ... during which time you can save up down payment money for a house plus develop 2 years worth of 'paper trail' regarding income histories and credit report histories. During that time, you could presumably swing a car loan ... although it may be at 'subprime' interest rates.

    The student loans aren't a problem, other than the fact that the monthly payments subtract from 'disposable' income ... which obviously affects the size of monthly mortgage payments a mortgage lender is allowed to approve. Having a pre-existing car loan payment will also subtract from 'disposable' income ... to the point where it may interfere with mortgage approval. As such, your best bet is probably to make a move on a late model / year end car to replace your aging present car before it loses any more trade-in value and costs you more money in repairs ... and to pay off the car loan in 24 months or whatever so it's 'off the table' when the time comes to apply for a mortgage loan.

    Delaying plans to buy a house for a couple of years will also provide good indication whether or not your relationship with your BF is 'stable' enough to trust him as a 'partner' in a mortgage that is going to have a term of 15-30 years. Not wanting to dwell on the topic, but for a fact if your BF 'flakes out' you could be put in a position of having to cover the entire mortgage payment without his help ... or risk losing your down payment money and equity if you can't handle the mortgage payment alone and are forced to default.
    Last edited by Melonie; 06-25-2014 at 03:38 PM.

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    Default Re: Two major purchases in the next two years...ish?

    ^ Very good question. I was with my fiancé for 4 years when I built my house. I refused to put his name on the title, loan. He had bad credit( he did give me 10,000) which was 10% of what I put in and we broke up. So yeah think twice about that.

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    Default Re: Two major purchases in the next two years...ish?

    My income level before this job was $30k salary, plus dancing. This would put me with a year of documented salaried employment, but my work before then was hourly, inconsistent, and poorly paid. Our lease ends in November, so we will be renting again till November 2015 at least, and by then I will have 22 months of just over a $50k gross salary.

    We don't yet have the down payment + closing costs saved, primarily because I'm having a big chunk of money taken out of my checks each month to pay off work-related certifications. I will finish with this in October though. I will also be moving up a pay bracket and receiving a $2,500/year raise, so I will have more of my income to actually devote to savings. Crossing fingers against new tragedies, we should be able to save much more money each month after October.

    I am definitely thinking twice and three times about purchasing a home jointly... I love my boyfriend, and I am confident we work well together, but I witnessed my mother make a lot of poor financial decisions because of relationships, so repeating that is one of my worst fears... He hates renting and wants to buy as soon as it is even maybe possible, but I think giving it 12-24 months will be a good thing.

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    Default Re: Two major purchases in the next two years...ish?

    so we will be renting again till November 2015 at least, and by then I will have 22 months of just over a $50k gross salary.
    This will help a lot with mortgage lenders, both regarding the price of the house / size of the monthly mortgage payment they can approve, as well as landing you a lower 'prime' interest rate on the mortgage if the monthly mortgage payment size versus verifiable monthly income available remains well below the 28% regulatory maximum.


    Crossing fingers against new tragedies, we should be able to save much more money each month after October.
    well, even with a $50k pre-tax income and no 'extraordinary' expenses, it is still going to take at least a couple of years to save up $25k or whatever for down payment plus closing costs toward a $100k house.


    I am definitely thinking twice and three times about purchasing a home jointly... I love my boyfriend, and I am confident we work well together, but I witnessed my mother make a lot of poor financial decisions because of relationships, so repeating that is one of my worst fears... He hates renting and wants to buy as soon as it is even maybe possible, but I think giving it 12-24 months will be a good thing.
    Indeed, buying a house together with a 15+ year mortgage term potentially places you in a vulnerable financial position for those 15+ years !!! Pragmatically speaking, having your BF 'flake out' could cost you tens of thousands of dollars in mortgage default related losses, or 'strap' you with 100% responsibility to make mortgage + insurance + property tax payments for the next 15+ years out of your own income only ( potentially leaving next to nothing left over to spend on anything else ) to avoid those losses ( and also avoid your own credit rating being destroyed ). That requires a LOT of trust.

    Obviously, saving up the $25k or whatever in down payment money over the course of the next two years will be the first real 'test' of your bf's commitment / financial responsibility. If he still has the same job at the end of that time, if he has maintained financial discipline to save down payment money ( versus additional spending on cars, cycles, big screen TV's etc ) this will tell you a lot in regard to how the following 15+ years is likely to go.


    PS personally speaking, without the legal and financial protections of marriage / divorce, there is no way that I would ever consider putting another person's name on the title to a house ( or the title to a car or anything else, for that matter ) under any circumstances.
    Last edited by Melonie; 06-26-2014 at 03:55 AM.

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    Default Re: Two major purchases in the next two years...ish?

    Is it possible for her to add his name later? I bought all mine in my own name. That could be an option. Also when my ex gave me that money he made me write a letter and notarize it saying if we broke up and I sold the house I'd pay him back his money. Lol. Key word if I sold the house. He also left 2 years before and was living with his uncle because I kicked him out and he traveled( was gone 5 months a year) so, I told him I'd give him 3,000 since if he abandoned payments on anything they'd repo it or forclose and he took it but it was an excuse to keep me in his life for years longer than I wanted.

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    Default Re: Two major purchases in the next two years...ish?

    Melonie, you are becoming my financial spirit animal. Reading responses, it seems more reasonable to plan for purchasing a home in 24-48 months, rather than 12-24. Disappointing, but I'm glad to have a more realistic timeline.

    We will definitely be married if we buy a house--that is my rule. My boyfriend is all about commitment, and if it were up to him, we would already be married. His idea of the perfect relationship is molded by his grandparents. One set of them has been married since they were 15 and are still devoted to one another. The other set were married till his grandmother died from a number of illnesses. Before her death, she was in a wheelchair and largely dependent on her husband. My boyfriend is still a little hurt and confused by the fact that his grandfather found a second partner after his wife's death. His parents are still together as well and have been married since they were in their early twenties. Recently, we ran into my boyfriend's old best friend's little brother and his fiancee. I could tell my boyfriend was a little jealous that they were getting married. He has been looking into engagement rings (he's horrible at hiding things...), so I believe we will be "officially" engaged soon. I don't want to be married till we're 26 though, because of health insurance. He does need to work on budgeting and the like, but we are on the same page regarding financial goals and major obligations, like where we want to live and the fact that we don't want children. I am rambling, but I guess my point is that I will definitely heed the advice about co-ownership and marriage. I don't believe I could own a home with anyone who didn't want to be legally married, and I don't believe I could marry anyone who didn't have such devout feelings about marriage.

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    Default Re: Two major purchases in the next two years...ish?

    Quote Originally Posted by michele11 View Post
    Is it possible for her to add his name later? I bought all mine in my own name. That could be an option. Also when my ex gave me that money he made me write a letter and notarize it saying if we broke up and I sold the house I'd pay him back his money. Lol. Key word if I sold the house. He also left 2 years before and was living with his uncle because I kicked him out and he traveled( was gone 5 months a year) so, I told him I'd give him 3,000 since if he abandoned payments on anything they'd repo it or forclose and he took it but it was an excuse to keep me in his life for years longer than I wanted.
    Do notarized letters hold up in court? Obviously they could get a lawyer that could argue the meanings of the terminology (like in yours case with the "IF" you move thing), but I wonder if they even hold up in court?

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    Default Re: Two major purchases in the next two years...ish?

    ^I'm not sure. He told me he contacted a lawyer and he told him yes. But it would probably cost him 3-4000 to do so. He just kept using it to stay in my life. Same reason he kept me on his cell phone plan for 3 years after we broke up. I think they possibly could. He probably could of took me to small claims court? His goal still and always will be to try to keep me in his life somehow. He brought up getting more of his money the other day when I didn't want him to move back here. Honestly he's probably lost the letter by now. I got a hold of it when we were still together and tried to rip it up. He cried. HAHAH. sorry but I can't stand weak men.

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    Default Re: Two major purchases in the next two years...ish?

    Quote Originally Posted by tuesdaymarie View Post
    Melonie, you are becoming my financial spirit animal. Reading responses, it seems more reasonable to plan for purchasing a home in 24-48 months, rather than 12-24. Disappointing, but I'm glad to have a more realistic timeline.

    We will definitely be married if we buy a house--that is my rule. My boyfriend is all about commitment, and if it were up to him, we would already be married. His idea of the perfect relationship is molded by his grandparents. One set of them has been married since they were 15 and are still devoted to one another. The other set were married till his grandmother died from a number of illnesses. Before her death, she was in a wheelchair and largely dependent on her husband. My boyfriend is still a little hurt and confused by the fact that his grandfather found a second partner after his wife's death. His parents are still together as well and have been married since they were in their early twenties. Recently, we ran into my boyfriend's old best friend's little brother and his fiancee. I could tell my boyfriend was a little jealous that they were getting married. He has been looking into engagement rings (he's horrible at hiding things...), so I believe we will be "officially" engaged soon. I don't want to be married till we're 26 though, because of health insurance. He does need to work on budgeting and the like, but we are on the same page regarding financial goals and major obligations, like where we want to live and the fact that we don't want children. I am rambling, but I guess my point is that I will definitely heed the advice about co-ownership and marriage. I don't believe I could own a home with anyone who didn't want to be legally married, and I don't believe I could marry anyone who didn't have such devout feelings about marriage.
    You're only 26????!!!! You seem to be so much more mature. Good for you, Girl!!!

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    Default Re: Two major purchases in the next two years...ish?

    ^24! So my "26 minimum" rule has another two years to go, haha. Thank you though. I was an absolute idiot from the ages of 17 to 21, but I like to think I have my head on at least semi-straight now.

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    Default Re: Two major purchases in the next two years...ish?

    I don't want to be married till we're 26 though, because of health insurance.
    You may need to re-run the math on this ... since ObamaCare now imposes a huge 'marriage penalty' in terms of available subsidies.

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    Default Re: Two major purchases in the next two years...ish?

    ^What does that mean, exactly? I need to get a Finance For Dummies book or something...

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    Default Re: Two major purchases in the next two years...ish?

    ^^^ it means that two single people each qualify for subsidized insurance premiums if their incomes are below 400% of FPL ( = $47,000 per year ) , while a married couple loses eligibility for subsidized insurance premiums if their combined incomes exceed $ 62,000 !!! And the dollar value of the subsidies can be worth up to $10,000 per year i.e. the same as your future mortgage payment. See

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    Default Re: Two major purchases in the next two years...ish?

    Wow, I had no clue. Do laws like this typically refer to gross or net income? If it's gross, I'm afraid we don't qualify either way. We were actually planning on the 26 minimum thing because his parents currently have a family insurance plan that does not cost them any extra to include my boyfriend on (it's a 3- to 5-person cost, and they have a teenager still at home).

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    Default Re: Two major purchases in the next two years...ish?

    Quote Originally Posted by Melonie View Post
    ^^^ it means that two single people each qualify for subsidized insurance premiums if their incomes are below 400% of FPL ( = $47,000 per year ) , while a married couple loses eligibility for subsidized insurance premiums if their combined incomes exceed $ 62,000 !!! And the dollar value of the subsidies can be worth up to $10,000 per year i.e. the same as your future mortgage payment. See
    what typoe of insurance are you talking about. I put 20% down on all my homes and I wasn't required to carry any.

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    Default Re: Two major purchases in the next two years...ish?

    In regard to the 'marriage penalty', the reference was to Public Exchange Health Insurance ... and the income based eligibility cutoff for subsidized monthly health insurance premiums. However, a 'marriage penalty' also potentially applies in other circumstances, like US income taxes. See

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    Default Re: Two major purchases in the next two years...ish?

    What I'm wondering is how to save the 25% while you rent when you have 10,000 in debt and rent is 900 plus 200 a month for oil. That's where I'm at. I can't be enough of a whore to get ahead. We have 2 incomes.( neither one is really substantial) No kids. And we don't go out.
    If we could get a mortgage out "rent" payment would drop in half. From 1,100 to 350-500 for a house ranging 50,000 to 85,000. It seems so unfair. It takes him 2 paychecks plus to pay the rent and oil. That's at a job making 16 hr. Totally frustrating. Camming isn't paying much of shit since 2014 hit with the worst winter ever. To go out and get a "real" job is not even worth it.
    Anywy. Sorry to hijack.

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    Default Re: Two major purchases in the next two years...ish?

    From 1,100 to 350-500 for a house ranging 50,000 to 85,000. It seems so unfair.
    When attempting to make this comparison, make sure that you 'turn over all the rocks'. Besides the $500 house mortgage payment, you may also be facing another $ 200 a month for property taxes, another $100 a month for homeowner's insurance, another $200 a month in average home maintenance expenses, etc. There are a lot of non-property purchase related cost components anonymously bundled together into rent payments which can appear later as painful surprises for first time homeowners.

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