So my sister is finally going to get to own her own home, a dream she’s had for a very long time. I hate to dash her dream, but here’s the reality I see.
This is my sister with the bad credit problem. She says the lending company told her her credit rating is 765, and has nothing to worry about. Okay, that’s great. That’s pretty much fantastic.
Initially she asked me if I could help her out with any money at all, as she needs to come up with $2900 cash for the closing costs. Later in the day she called to let me know she’s applied for a $5000 loan through the credit union.
She’s so excited, it’s a $100,000 home and she says her mortgage payment is estimated to be $750. She says she’s paying almost that much now. I asked her if she knew what kind of a mortgage she was applying for, she didn’t. I warned her to make sure it wasn’t an ARM. I also explained that the rule of thumb is to assume you’ll be paying $100 for every $10,000 due to escrow fees of taxes and insurance. Later in the day she called me and she was still glowy and happy about paying nearly the same amount for her own home as the rent she’s been paying!
My sister has been living in HUD housing, which tends to keep you down. My sister owns her own business, cleaning houses, and makes a fair wage, but she is required to pay 30% of her income toward the rent payment. The Internal Revenue Service is already taking nearly 30% of her income in taxes (since she’s self-employed), and she has to pay HUD 30%. This has kept her restricted to a point – the more she makes, the more on both she’s had to pay!
I told her a couple of weeks ago she needs to sit down and figure out just how much money she needs to make to afford to get out of HUD housing. I told her she has the potential to make a lot of money in her business, and she could even get to the point where she could hire others to work for her. Hey, it can happen!
But the picture isn’t so rosy right now. I hope she’s on her way to digging out of the hole she’s gotten into – thankfully she doesn’t have too much debt – I know she has one credit card that’s around $2000. Unfortunately, her boyfriend has had a very hard time finding work, I’m afraid due to his alcoholism. My sister is also looking forward to becoming a grandmother… but her son who is just 16 (he’ll turn 17 next month!!) is unemployed, and having a dickens of a time finding a job. The girlfriend… who is 21 (girl, what were you thinking!) is also unemployed (UPDATE: the girlfriend apparently works and brings home $2000 a month and the son says if my sister expects them to pay more than $100 a month to live there, then they’ll just go someplace else to live where they can live for free! Oh boy, I’d like to pop that kid one! I guess the girlfriend’s mother has been letting them live with her for nothing at all).
The house is 2000 square feet and a two story. Her electricity bill is guaranteed to skyrocket. She might be better off to find a one story home, since two story homes require two air conditioners. And with home ownership comes the responsibility of paying for the repairs yourself. Anything that goes wrong, you have to be the one to fix it. Now I understand the boyfriend is a “handyman” type, so maybe he’ll find a way to “earn his keep”.
My sister is counting on the first time homeowners rebate to pay off the $5000 loan she’s counting on in order to make the closing costs, she says she’ll get $8000. I really don’t know anything about it, haven’t paid much attention to it as I wouldn’t qualify. Hopefully that is how much she’ll get.
I’m really thrilled for my sister, I hope she can make a new start. It is VERY exciting that she’ll be able to get out from under HUD housing and own her very own home. But I also hope for her sake that the boyfriend gets off his duff and starts bringing in some money, or takes a hike. And I hope her son and the girlfriend will contribute. She might be able to make it.
But I don’t know; I’m a little worried for her.