I lost my father about 11 months ago and I've been really struggling to figure out how to proceed moving forward due to a lot of circumstances related to my mom. I'm 22 years old and lost my father when he was 57 years old. My mother (57) is on disability and receives about ~$1300 every month from disability + SS for my dad. She also does part-time contractural work where she earns about an additional $600/month. I've done research on that part to make sure she can do part-time work and still receive benefits and I believe she makes under the income guidelines to remain on disability (she is prescribed a very expensive medicine so it is extremely necessary that she retains these benefits). Am I right about the income limits and still receiving disability?
The issue with her only making $1900/month is that it makes her ability to find a living situation very difficult. Our family has never had much money and we've had to rent a house for the past 8 years after our house got foreclosed on. We are located in the Twin Cities (Minnesota) so rental prices are typically in the $1300-1800 range for a house. With almost all rental locations, they require 2.5-3x income so it's going to be impossible for her to find a house she can live in on her own. Right now, I live with my mom, along with my GF, my sister (23), and her BF. My brother is in his sophomore year of college so he's out of the picture for 9 months out of the year. The plan is to have everyone move out sometime in the next year, which means that my mom is going to have to find somewhere cheaper to live because she obviously could not afford a $1500 rent.
Now, a solution would be to live with my mom. I would not mind doing this, but I don't want to force my GF to live in a situation that I am unsure of how long it will take to get out of. She wants to start to live her own life and my sister and her BF are in the same boat. Therefore, I need to find a house for my mom.
Another solution would be to forego getting a house and instead find her an apartment. However, I believe she'd run into the same issue with the rental income limits. We also have a German Shepherd that we got her about 9 months before my father's passing. She is extremely connected to this dog and needs a yard for him. He's also a very vocal and protective dog so he would not do well in an apartment complex.
Now, here comes my solution which is where I need real personal finance advice. My plan is for my GF and me to purchase a house for my mother and to have her live in it. She would pay the mortgage + taxes for it. That way, she bypasses any income limits and it would allow her to have a house that she can live in with her dog. It's also an investment opportunity for myself and my GF, as we would be paying off our mortgage without spending anything out of pocket (other than maintenance fees, which we would have to work out with my mom).
As to where I would find the money to afford a house, I've got about $20k currently saved up and my GF has roughly $27k saved. We collectively make about $4,500 (after taxes) a month. Of this, we save about $2,000-2,500 a month so we could add to our net worth substantially over the next year. My plan for a house would be something in the $200,000-$220,000, of which we'd put down a 20% down-payment ($40,000-$44,000) so that we avoid PMI fee on the mortgage. I worked out the numbers and this puts the mortgage payment at roughly ~$800 on a fixed 30 year loan at market rates. Throw on another $200/mo + $100/mo in Insurance + property taxes and we're looking at roughly $1,100 in monthly payments. My mom could afford to pay that all, but I might also request some help from my sister in paying a portion of it ($150/mo). I think it's fair because my GF and I are the ones taking the risks and are dedicating time to figuring everything out. Speaking of risks, I feel like that's the one thing that's going to be mentioned here.
I am well aware that we could sink money into a POS house and end up needing extensive repairs. We could end up having very little money left over after purchasing this house to deal with those kinds of issues, so I need to be very stringent in figuring out how much money I'm going to have left over when this is all finalized. If anyone has advice on how to go about ensuring that I'm buying a house that is a safe investment that isn't going to be a money-drain, I'd appreciate it. I'm definitely going to be doing tons of research into home inspections and all of the processes that go into purchasing a home. Of which, one factor that I have limited knowledge of is closing costs. Roughly what should we be expecting to pay on top of a down-payment when we're finalizing a deal on a house?
Another factor I feel that is going to be called into question is my age. I'm only 22 and my GF is 21, so we're going to have limited credit histories. Thankfully, I started building credit somewhat early (in 2015), so I do have a decent credit score (730-740ish). However, I've gotten into the business of churning credit card bonuses over the past year and have opened 4 credit cards in the past year so my credit score has taken a hit. This has brought my score down to as low as 710 on some FICO trackers, so I am definitely concerned about that. I have ceased from opening up any credit cards for the next year, so I'm hoping that score finalizes somewhere in the 740 range. If anyone knows how long that type of activity is going to negatively impact my credit, I'm curious. I have always paid every bill on time and have retained a very low utilization rate.
My GF on the other hand has very limited credit history. She opened up her first credit card at the beginning of this year, which she has paid every bill for on time. She got her first FICO score recently and she was somewhere in the 715-720, so I think she'll have a decent score in the next year. However, I'm assuming mortgage lenders are going to be concerned about both of our ages, low-ish combined income ($50,000-55,000 after taxes), and limited credit history. Do you think that we'll still receive a decent rate?
The last thing I wanted to inquire about is if we go through with this and we end up finding a house that she can live in. Is there any type of procedure I need to go about with having my mom live there and paying "rent"? Could I simply just have my mom pay the bills and not go any further or is there some tax implications that I need to worry about? As she's low-income, I believe she will qualify for SNAP and Energy Assistance. However, I don't know what the procedure for applying for those benefits would be with her living in a house with my name on it. Obviously, she would not qualify for those benefits if I was living there. Does it matter if the house is in my name for her to receive those additional benefits?
That's pretty much it. This post went on much longer than I expected it to. I'll just close it off with a concern of others that I'm sure will pop up, but I'm not worried about. That concern would be buying a house with someone that I'm not married to. Especially a couple that are a few years removed from being teenagers. I am not concerned about this. I am almost positive that she is going to be the one I eventually marry and I don't see anything changing. I'm well aware that things can go wrong though and in the off-chance that things ever went sour and we broke up, we're both very mature people. I'm confident that we'd be able to find a solution, which would likely just be splitting the ownership of the house in half. It's a conversation that would be had before even going into this.
I likely come off as some naive 22 year old, but I have been forced to grow up pretty quickly these past 11 months. All I need advice on is the financial logistics of this plan and if you believe it would work with the numbers laid out. If you think I should add additional details, let me know. If you have another solution that I'm missing, please let me know. This has been an issue I've been spending numerous hours contemplating about and I've yet to find one that works other than this. I've been forced into a less than ideal situation and I'm doing everything I can to figure it out.
TL;DR Naive 22 year old thinks it's a good idea for him and his 21 year old girlfriend to buy a house to rent out to his recently widowed disabled mother.
Submitted September 03, 2018 at 06:11AM by AdditionalPicture https://ift.tt/2NbuJut
