House Buying Question

Hello FWF,

A few months ago, my fiance's great uncle passed away and his house was left to his three nephews(he had no kids of his own). One of the nephews is my fiance's father. They are planning on selling the house and said that they would like for it to stay with somebody in the family. House appraised for ~159k and they are willing to sell to somebody in the family for 130k.

Facts:
-We are both 24, college grads
-Combined income is ~60k (she is first year out of education degree, noble but not high pay)
-She has no debt, I have ~38k student loan debt
-I have limited credit history, she has essentially no history
-10k in savings

My question is what is the likelihood that we will qualify for a mortgage (FHA, etc.) and what might be our best options to proceed with this situation? I am not too familiar with regulations regarding purchases within the family, etc. Any advice would be helpful, thanks all!

Well what will be a big factor is the appraisal of the home by the bank. If you have instant equity you will have a much better chance of getting the loan which is not huge. Also will you cause family strife if you decided to move and sell in 5 years? What would be the exit plan or is there an expectation that you will have to sell internal to the family for $130k later?

Lease to own agreement. Sign a contract saying you will purchase by end of 20XX so you can get married, get credit up to par to qualify for a loan. If you do not have a loan secured by that drop dead date you leave and they sell it on the market.

Save enought for a downpayment so that you can afford it on one salary. Don't have kids for now.

For me, I'd never do it. What if you sell? Do they get the equity back that they "gave" you by allowing a lower sell price? You are 24, you will learn. Never, ever do business with family.

Very valid questions in terms of future sale/move. I understand the idea of not mixing business/finance with family and I tend to live by that rule as well. However, this is a great opportunity for us. We are getting married this November, and I also understand the view that we are young, not married yet, relationship could go bad, etc. but I am confident that it will not (though I appreciate the advice). We plan on going to a couple lenders to seek pre-qualification/approval as next steps, but advice regarding this topic and things that we may not be thinking of is great. Thanks guys!

What a world we live in when $60k/year is noble but not high pay!

I'd agree with the poster who brought up home maintenance expenditures. It would also be a lot more work than just calling the landlord to fix a leaky sink or broken stove. It is definitely nice to get the home below market value, but you should really make sure that THIS is the house that you guys want. The $30k savings is only worth it if the house would be a good fit for you guys. Additionally, depending on what part of the country you are in, $130k could be considered an expensive starter home.

uutxs said:   Squeezer99 said:   What a world we live in when $60k/year is noble but not high pay!
It is 60k combined (two incomes).

Yes 60k combined (40 from me, 20 from her). She understands that she will never make a lot of money in education, and I understand that as well. Also, we are on in Southern NH, so 130k is relatively low for starter home. However, family concerns to that starter home still apply.

rmhop said:   is she like a teachers aid or something? $20k is super low.

Maybe he's talking take-home pay, instead of base salary?

It looks like full-time teachers in NH start around $30K.
See http://www.education.nh.gov/data/documents/teach_sal_sched_10_11.pdf

Yeah I know a few teachers who do very well for themselves. Starting pay is definitely low for how many years you have to go to school, but tenure and the union behind you are pretty huge. Also, I know a couple teachers that have gotten their masters (one teaches 2nd grade) and they make quite a bit more because of it

beanie4me said:   mmills06 said:   Yes 60k combined (40 from me, 20 from her). She understands that she will never make a lot of money in education, and I understand that as well.

BS that you can't make a lot of money in education. Base salaries may not be amazing, but there are opportunities to increase it (ex. high-need stipends for Special Ed teachers, etc) or supplement it (ex. after-school private tutoring, teach summer school, etc).

My wife is a teacher, and many of her coworkers are flat broke. But it's mostly because they blow their money on iPhones and designer handbags.

Having money is simple: Spend less than you earn.

This is totally dependent on the district and state you live in. In some areas of the country it is very difficult, due to the cost of living and salaries, to make a lot of money in education. Not all places offer stipends for special ed, or support private tutoring, etc. Many teachers also work long hours (my parents both worked ~70 hour workweeks when I was growing up, due to extracurricular requirements, report cards, conferences, department meetings, grading projects, etc.).

It really depends on the district, the state, and the dedication of the teacher as to how much money they will make, and how much extra time they will have for other earning opportunities. My parents are both very frugal, and will have a comfortable lower middle class retirement. To say that they could easily have made "big money" in education, however, is laughable.

mmills06 said:   I guess I should have clarified a little more haha. Specifically, she has her BS in Early Childhood Education, she is working in what is basically a glorified day care (Kindergarden/Preschool age, and younger) so yeah she only makes 11/hr. She definitely has potential to make much more (and by much I mean up into 35ish range in the near future in an Elementary School, and more with time) but it is one of those things where you need to get so many hours of actual classroom experience before elementary schools will even consider you. Haha, interesting turn this thread has taken.

Another thing regarding my initial post, if we were to be approved for a FHA mortgage, would we still be required to pay PMI even though the mortgage would technically be 80% LTV? Just wondering, I am still an amateur so if this is a dumb question I am sorry.
Mortgage lenders usually consider the lower of the appraised value and the actual sale price as "V" in the LTV calculation. Unless you put in actual 20% down, you are unlikely to have 80% LTV.

not bragging, but hopefully it will help with perspective. wife and i were just pre-qualified for 135k financing on a 150k home (15k down). i have 54k income while wife looks for new job. wife has excellent credit, i have okay credit. our composite score is below 680.

robodukie said:   beanie4me said:   mmills06 said:   Yes 60k combined (40 from me, 20 from her). She understands that she will never make a lot of money in education, and I understand that as well.

BS that you can't make a lot of money in education. Base salaries may not be amazing, but there are opportunities to increase it (ex. high-need stipends for Special Ed teachers, etc) or supplement it (ex. after-school private tutoring, teach summer school, etc).

My wife is a teacher, and many of her coworkers are flat broke. But it's mostly because they blow their money on iPhones and designer handbags.

Having money is simple: Spend less than you earn.

This is totally dependent on the district and state you live in. In some areas of the country it is very difficult, due to the cost of living and salaries, to make a lot of money in education. Not all places offer stipends for special ed, or support private tutoring, etc. Many teachers also work long hours (my parents both worked ~70 hour workweeks when I was growing up, due to extracurricular requirements, report cards, conferences, department meetings, grading projects, etc.).

It really depends on the district, the state, and the dedication of the teacher as to how much money they will make, and how much extra time they will have for other earning opportunities. My parents are both very frugal, and will have a comfortable lower middle class retirement. To say that they could easily have made "big money" in education, however, is laughable.

Let's not get overly dramatic here. Lots of us here work more then 40 hours a week doing jobs that keep people employed so they can send their kids to school. Lots of people here volunteer for youth groups on their off time. One group is not more honorable then the next.

The average teacher salary in my state is in the 40's. States differ but that is a fine salary here. Add in the union, tenure and pension then it's not a bad gig at all. No different then any other career.

saladdin said:   mmills06 said:   I guess I should have clarified a little more haha. Specifically, she has her BS in Early Childhood Education, she is working in what is basically a glorified day care (Kindergarden/Preschool age, and younger) so yeah she only makes 11/hr. She definitely has potential to make much more (and by much I mean up into 35ish range in the near future in an Elementary School, and more with time) but it is one of those things where you need to get so many hours of actual classroom experience before elementary schools will even consider you. Haha, interesting turn this thread has taken.

Another thing regarding my initial post, if we were to be approved for a FHA mortgage, would we still be required to pay PMI even though the mortgage would technically be 80% LTV? Just wondering, I am still an amateur so if this is a dumb question I am sorry.

Dude. I know exactly what she is doing. My gf did the exact same thing, Early Childhood Development for a state sponsored preschool/daycare based on income. She the one that has to give the little cartons of milk out to the kids?

I want to point out she used to do this. Your wife will go nowhere with this degree. She needs to go back to school and get a teaching certificate or new career. This is not teaching, only babysitting.

She has her teaching certificate and is Certified with the State of NH, but she is working for the hours right now (I think she needs something like 2,000 or 3,000 I forget, but it is a state requirement) before getting into an elementary school.

As for the other questions, net income is somewhere around 3600/month before our expenses. Right now:
Rent: 1000/month
Utils: 175/month
Other (Ins, phone, etc.): 300/month
My SL's: Minimum 350, have been paying 500/month (could consolidate, but I can afford for now)

Also, looks like the majority agree that the big concern is the family issue and what to do if/when selling the house when it come to equity, etc. Any other issues I should bring up when we meet again with the family?

Indeed. Good point. Just running numbers seems like we would be looking at 1200ish/month for payment (principal, interest, MIP, tax, insurance) compared to paying 1000 in rent now. Is it a bad idea to try to pitch owner financing? To avoid mortgage insurance? Obviously not ideal, or rent to buy situation?

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saladdin said:   robodukie said:   beanie4me said:   mmills06 said:   Yes 60k combined (40 from me, 20 from her). She understands that she will never make a lot of money in education, and I understand that as well.

BS that you can't make a lot of money in education. Base salaries may not be amazing, but there are opportunities to increase it (ex. high-need stipends for Special Ed teachers, etc) or supplement it (ex. after-school private tutoring, teach summer school, etc).

My wife is a teacher, and many of her coworkers are flat broke. But it's mostly because they blow their money on iPhones and designer handbags.

Having money is simple: Spend less than you earn.

This is totally dependent on the district and state you live in. In some areas of the country it is very difficult, due to the cost of living and salaries, to make a lot of money in education. Not all places offer stipends for special ed, or support private tutoring, etc. Many teachers also work long hours (my parents both worked ~70 hour workweeks when I was growing up, due to extracurricular requirements, report cards, conferences, department meetings, grading projects, etc.).

It really depends on the district, the state, and the dedication of the teacher as to how much money they will make, and how much extra time they will have for other earning opportunities. My parents are both very frugal, and will have a comfortable lower middle class retirement. To say that they could easily have made "big money" in education, however, is laughable.

Let's not get overly dramatic here. Lots of us here work more then 40 hours a week doing jobs that keep people employed so they can send their kids to school. Lots of people here volunteer for youth groups on their off time. One group is not more honorable then the next.

The average teacher salary in my state is in the 40's. States differ but that is a fine salary here. Add in the union, tenure and pension then it's not a bad gig at all. No different then any other career.

I wasn't being overly dramatic or saying that teachers are more honorable than anyone. I was simply pointing out that it is incorrect to say that it is easy for any teacher to make big money.

None of the things I mentioned were volunteer activities for my parents- they had no choice but to grade papers, fill out report cards, go to department meetings, attend courses to keep teachers license current, etc. I just think it is silly when people tell teachers they should get a second job because their work is allegedly done as soon as the kids go home- it just doesn't work that way for most teachers.

Maybe 40k a year qualifies as big money to you, but I think that is pretty silly. It is roughly a similar average in my home state, but starting is in the low/mid 20s and if you work there for 30-40 years, then you get up to about 60. So there is a similar average, but that is hardly easy to live like a fat cat.