Where do I start with questions about finances related to first time marriage/home buying?

In My Humble Opinion
1

I feel like a big dummy. I’m 43, unmarried, and have never bought a house. I hardly know where to start.

My first guess is to meet with a financial planner and get realistic about my financial situation. I’m already pretty realistic: I make a decent salary, I have a little bit of debt, and not a lot of savings. I have no grandiose idea of what I can afford. When I was in my 20s and making $35K, some mortgage lender told me I could afford a $170K house. It sounded so preposterous that I walked out of there and never went back, and continued on with a fairly healthy mistrust of the whole enterprise, and am still a renter. I have 170 credit score.

I’ll be married within the next year or two, and that’s another (couple) complication(s) to the matter. My SO lives over an hour away in a very small, depressed-economy town, and teaches at the local school. He doesn’t want to teach anymore so he’s the most relocate-able. Our plan is for him to move here. However he owns a house. That needs work. That he can’t afford. (Huge 100 year old 3-story victorian with gorgeous original wood interior, but has an old leaking roof that needs to be repaired/replaced, and is in dire need of paint and wrap-around porch repair, all of which would require climbing scaffolding at the very least. He’s clumsy. I don’t see this playing out well as a DIY project.) I’ve had a tiny desire to try to keep the house and fix it up together, but the 1.5 hour commute would kill me, and the depressed economy around there worries me that it wouldn’t sell anyway. I have no idea how he’s going to be able to sell it as is with a leaky roof. He paid $79K for it as a farm loan sale (or whatever you call it).

But we have to make a plan, because we’re good for about another year of long distance travel and then we want to get this move/marriage made.

I’ve never been married either, so I have no idea how the house he owns (and potentially can’t sell) will affect us financially as a married couple. Or whether I should buy a house on my own, based on only my income, for us to inhabit as a married couple, and when he gets his house figured out, then we can get him added to the deed (haha I don’t even know if that’s how it works). He feels very strongly about owning a home vs. renting (and I ideally would like to own a home as a married couple), although he concedes that renting until things are ironed out is probably a good plan. Clearly I want to keep my good credit intact as much as possible and want to help him to be able to improve his (which is so-so bordering on not that great).

Are these the kinds of questions to ask a financial planner? Or a mortgage lender? Or hell, a lawyer?

2

Is that a typo? Because if it isn’t, keep renting - you’ll never qualify for a mortgage.

3

Hahahaha 740! Wherever I got the 170, I’ll never know. Can somebody change that? :smack:

4

So, if I’m understanding your situation, you appear to want to purchase a house together with your husband-to-be, but want to make sure that you set things up legally so that the liability of this house he already owns doesn’t hurt your ability to get a mortgage. Is this correct? How much does he currently owe on the house, i.e. is he underwater? Can you afford to keep paying that mortgage for a while, or do you have to sell that house before you can consider buying anything? Are you planning to fully merge your finances and debt when you get married, or do you want some protection in case things don’t work out?

If you’re not looking to keep his debt off your books in the event of divorce but just want to maximize your chance at mortgage approval, I would probably just start by talking to a couple of lenders / mortgage brokers first and just ask them their opinion. That has the bonus of being free and will hopefully give you enough information to decide what you want to do. If the advice turns out to be something like “buy the house in your name, add him to the deed later” then I’d probably talk to a lawyer about how to set this up in advance. If the advice turns out to be “it doesn’t matter what you do, since you’ll need his income on the application to qualify” then you can save yourself the cost of meeting with a lawyer.

5

I work in the financial services sector, but in the UK. I have basic qualifications as a financial planner but I do not work in that area at the moment. I am also married and own a property. None of this makes the following worth any more than zilch, but here goes.

Firstly, good to hear the credit score was a typo! Being “in the business”, I do think financial planners are a good idea in general, if only for the basic education they can give you. Be aware that the term “financial planner” usually refers to someone who will review your entire financial situation and then make recommendations as to what you should do, usually involving selling you a product. A good financial planner will only try to sell you products that will be genuinely beneficial and affordable to you, and they will disclose up front exactly what their cut is. The best kind will offer you the option of paying a fixed fee for their services but it is also common for them to be paid by commission from whatever product they sell you - this is fine provided you know that this is involved and it is not at an outrageous level that reduces the benefit of the product. I would say it is important to go to a planner who is “independent” - in other words, they are not restricted to only selling products from one company. The above applies in the UK and I assume it will be similar in the US, I can’t be certain but I’m sure the prinicples are the same even if the terminology is different.

A bad financial planner will try to sell you products you don’t want or need so that they can take their commission and run - you don’t want anything to do with this type. I imagine there will be websites where you can search for independent financial planners in your area, and I guess it won’t be too hard to also search for independent customer reviews of their services.

Most of the above will perhaps not be relevant to your main questions at the moment, which seem to be specifically related to mortgages. If that’s all you want to focus on, it would not be unreasonable to put the financial planning idea aside for the moment and simply see an independent mortgage adviser. A good one of these will be able to tell you pretty quickly what sort of mortgages are available for your situation, and give you advice on what will suit financially. A mortgage lender (e.g. a bank) is different and will typically only be able to advise you on whatever products they offer - which may or may not be the most suitable for you. So again, I’d say that word “independent” is key. Having said that, there would be no harm in making an appointment at your local bank (for example) to talk about what mortgages they can offer you - that should be a good starting point.

In terms of whether you can buy a house on your own and then later transfer it into joint ownership with your future husband, that will depend on two things - your ability to secure the necessary mortgage on your own without his income/contribution towards the deposit (if you can’t then it’s a non-starter), and the law in your locality as to the practicalities of the later transfer into joint-ownership, which I guess ought to be possible - but this is where you may need a lawyer. On the other hand, you may not - it’s bound to be a common situation so both your mortgage adviser and mortgage lender should have past experience of it and may be able to advise. You will also want to make a will at some point, probably after you are married. Other than that, I don’t see how marriage will affect property you each own individually - unless you somehow get added to his existing mortgage. This won’t happen automatically just because you got married.

It strikes me from your post that your main questions at the moment are not financial or legal, but relating to what you actually want. That is much harder to help with, but I guess one way of approaching it is working out what is possible legally and financially first, and then using that information to help you decide. It seems like that’s what you’re doing, which is great. If it turns out that some of the options are financially or legally impossible, you can cross them off the list of choices, though that may be hard. Just eyeballing it, I don’t think that’s going to be the case, but once you know all the costs involved of each option, that should help you to evaluate them.

Hope this is reasonably clear and of some use - I will try to answer any follow-up questions if you have them.

6

Well, if your SO owns the house outright, or even has some equity in it, then he could finance the fix up costs through a home equity line of credit. That gives him the funds to get the repairs done and get it up to marketable, then he can put it on the market and use the proceeds to pay off the main mortgage as well as paying off the home equity line of credit. If there’s sufficient profit leftover, that would be his contribution to the downpayment on the marriage home.

Both getting married and buying a house are incredibly stressful. I’d do one or the other, make sure all the dust has settled, then start in on the next thing.

When someone tells you that you can afford 170K worth of house, that doesn’t mean you HAVE to buy that much house. You could also buy a 100K house. There are lots of calculators online to help you decide how much you can afford. Think PITI payments: that’s Primary Mortgage, Interest, Taxes, and Insurance. When you have a mortgage, generally the mortgage lender sets up the payments in an escrow account and the mortgage company pays your homeowners’ insurance and your local property taxes. The interest on the loan is also included in this one payment that you make every month. When lenders quote that you can afford 170K in house, they are not breaking down for you what the payment would be including interest, taxes, and insurance.

You have a lot of questions and I’ve got somewhere else to be so I’ll just stop there and let the other Dopers take their cracks at offering helpful advice.

7

Try to reduce everything to money. For your SO’s house, talk to some realtors and see what is on the market, and see if the investment in fixing up the house will yield a price high enough to justify it. (Which includes increasing the probability of a sale.) I’m sure you both don’t want to sell a dump, but it might be economically advantageous to let the buyer do the fixing.

For you, assuming that you plan on staying in the house you buy, think of cash flow. As mentioned, be sure to add in taxes, money for maintenance, utilities, and lots of other gotchas. That should tell you how much you can afford, then you can figure out how big a mortgage you can afford for that much money. That will tell you what house to get. Someone selling you a house is of course going to want you to stretch. It is okay to be a bit tight in the beginning since with inflation and expected raises the mortgage gets easier over time - but don’t be too pressed.
I have a financial planner, but we’ve never talked much about houses. Probably better to interview some realtors, but don’t sign anything and don’t let them convince you to start looking. In buying a house it is easy to agree to spend another $10K without thinking much about it.

8

I’d think 2 mortgages would be impossible. He’s sick and tired of teaching and is willing to walk away from it. He has a side business that would take a bit to ramp back up so that he’s making mortgage-payment money. So really he needs to unload the house in order to let his teaching job go. I guess I need to sit with him and learn about where he’s at, equity-wise. He’s owned it for about 5 years.

I don’t know much about the pros/cons of merging finances when mine are in pretty good shape and his aren’t. Maybe it would be smarter to keep them separate until he’s able to build his back up a bit- (and i would expect it’ll help him stay realistic about how his side biz is growing- or not) I’m cool with bringing in the bacon for now :slight_smile:

I just don’t know if you can get on a deed in the same way (or with the same ease) that you can get added to a rental lease.

My gut says to rent until we can get built up a bit, but he feels strongly that renting is a step backward, so I’m trying to at least respect his feelings by researching ownership options, even if his perspective seems a bit backward to me (why buy a house when you can’t afford to repair it?) To be fair, I’m the wrench in the game plan. He would have taken his time to fix it up- but at the same time the roof needs work probably before winter, and he just doesn’t have the cash, and neither do I or I’d give it to him and I wouldn’t be stressing about it.

9

I’ve actually thought about this very thing. The economy around that town is not great, and if you put a ton of repairs into the only nice house on the street, who’s going to want to buy it? I mean, there’s a dude around the corner who has a lawn jockey in blackface on his front porch! But the roof seems important. At least fixing the leaky part. Which he cannot do by himself. There are wires that run along the roof in the area that needs to be repaired (an a fall from ip there would be a death sentence) and I just don’t see a DIY project going well.

My big thing is that it seems like it can never be too soon to start asking these questions and getting answers. Selling a house doesn’t happen overnight, and I don’t want him to wait until next spring and then start flipping my lid with panic because nothing has been done to advance this plan of merging our lives together, and then time gets added on to the Big Plan, and I’m still here and he’s still there.

(I think he is of the mind that these things just work themselves out. I am of the mind that if you don’t work for it, it won’t happen. We’re working on meeting in the middle :slight_smile:

So then a realtor would be able to answer the question about how much work should be put into the house to try to sell it in that area?

10

You should use Zillow and Trulia to narrow down what’s going on in a 3 block to 1 mile radius of his house. ((The denser the town the smaller the radius. I live 1.5 miles from a major research university and there are 3 very differently priced neighborhoods in between)).

See what’s sold in the last 6-18 months and for what price. Make yourself a little list with notes, “55k old kitch/baths but good hardwood and solid walls with 1 garage”. Then once you have a lot of examples, go through with a highlighter and compare apples to apples with your fiance’s home.

Then be brutally honest and rate each of the comparable house 1-10 in what shape they’re in including his. Then you’ll have a very accurate figure of what the market will bear.

You probably have a good idea of your surroundings, so you know which of the realty companies is biggest. Go to their website, narrow your search to his area and see what sold this summer, in what condition and for how much. Compare with previous data and you should find a low number and a high number. List it in mid-May for the low number with a 60 day contingency so it gets unloaded quickly and so you have till mid july to move.

A realtor will always try and convince you to clean it up. Cleaned up, fixed up is easier for them to sell but less than half of all repairs/updating nets the homeowner money (mostly to to the ineptitude of their decision making process).

Do not buy a house because “renting is a step back”. He sounds very financially illiterate. Walking away from a steady paycheck without ample savings? Sounds like he’s someone who lets his emotions dictate his decision making process.

A man with a badly leaking roof in a bad neighborhood with an unconventional mortgage ready to quit his job and is giving you advice to buy a house. That’s like listening to diet advice from a guy waiting on gastric bypass.

11

Renting vs owning is an emotional thing for him. (Yes, he’s an emotional artist) I wouldn’t say he’s financially illiterate, I think he’s just a bit realistically illiterate. I try to encourage him to see the forest for the trees without being a nag. I realize he has some work to do, and I’m going to let him do it (and help him if I can) while keeping my own responsibilities in check.

Everybody’s gotta learn sometime, me included.

12

Assuming a 10% down payment and a 30 year mortgage at 4%, monthly payments on a mortgage for a $170K house would run about $730. Since there are other costs of upkeep, that amount indeed would probably be tight on a $35K income, although not out of the realm of possibility. As someone mentioned upthread, though, a mortgage lender is always going to try to show you the very top of your borrowing range, and a house a bit less expensive might work out to be very affordable.

Of course, I see from your profile that you’re in Redondo Beach, and you’re not going to find anything there for $170K. :(:wink: I’m even surprised that your fiance found a habitable property for $79K within an hour’s travel from there.

13

Sorry, I’m back in Ohio now. I thought I changed my location long ago. Will attend to that now!

I’ve heard that one can get a pretty sweet deal as a first time homebuyer (although not exactly sure what that means). Does that mean that if we get married, that status goes away since he has already purchased?

14

If by “other costs” you are referring to property tax and homeowner’s insurance, those can be a lot: for a $170K house, I’d estimate $2500 in annual property taxes, and $500 in annual insurance premiums. That’s an extra $250/month, so the OP would be looking at a total monthly payment of about $980. With only 10% down, there would be PMI, possibly adding another $100 per month.

The federal income tax deduction for interest and property tax would save the OP about $1200 per year (varies depending on marginal income tax rate).

Rather than trusting an outside source who says “you can afford a $XXX house”, the OP would be wise to come up with a budget, work out how much of a monthly payment they can be comfortable with, and then extrapolate from that just how much house they’ll be able to buy.

My sister bought me this book before I bought my first house ten years ago. It was pretty helpful. Alternatively, the Dummies book is probably a good choice, too.

15

Ohio has a first-time home buyer program.

16

Added to shopping cart. :smiley:

17

I haven’t been to this site in forever, but back in the day, I used it to figure this process out, as well as some other financial decisions I had no idea how to make (related to investments and retirement).

18

This is my advice to you. Making purchases for emotional reasons is a lot like doing drugs. The emotional benefit is real but fleeting; the negative consequences remain for years to come. You should treat merging your finances with an irrational spender in the same way you would treat merging your finances with someone who has an unchecked drug problem. In other words… don’t.

ETA: way to not answer the OP, self. I’ve heard the “dummies” book is actually very good. Personally, I understand the basics (other than dummies, books I’ve used are now totally outdated) but for decision making I have a financial advisor. It’s worth the (quite small) annual fee.

19

If not repairing the roof causes damage, it is a good thing to do. And besides him killing himself if he tries it himself, he could damage it worse. Plus the last thing you want is for the project to be ongoing when the house goes on the market. Our house had been put on the market before an upgrade was done, so no one looked at it during that time. When we came around it had a very high DOM number, and we got a really good deal on it.

I think a realtor is the best person to ask, but ask a few of them just to see what the range is. Also, if the price goes up even equal to the amount you put in, they get a cut of that, and might have an incentive for you to put in as much as possible to increase the sale price and thus their commission.

20

What’s a DOM number? (guess I should read the “dummies” book)

I don’t think my SO is an irrational spender. (he hardly spends on anything) but I think he bought a house because he wanted a house (and he always loved this house) and he probably didn’t fully realize the investment he’d just signed up for when he signed on the line.

And now he has me. Who is doing the research and may well come to the conclusion that we ain’t buying shit for a good long while. But I love him enough to explore the options, from the most practical to the most “I wish”, and we’ll go from there.