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I heard that there are a ton of credits and assistance for my county/state for first time home buyers, so I started to casually look at the assistance programs.

Unfortunately, because I would be living with my (unmarried) partner, we make barely too much combined to qualify for most of state and county assistance programs. I think the only program we qualify for is Pennsylvania's closing costs loan.

I net 70k, gross ~60k last year. Partner grossed ~40k last year. We both have 700+ credit scores and no credit card dept. Rent is currently $1,345. My partner's finances mostly break even, even with me footing ~75% of rent, foot, etc; though I still save $200-400/mo for a down payment.

Between us I could wrangle a ~$20k down payment from our savings. If a PA loan can cover closing costs, I hope to keep some of the savings for actual moving costs and initial home improvements (painting, carpeting, etc).

So my questions are:

How much home is realistic for me? I was looking at around $250k, or monthly payments around $900. Would it make sense for taxes or assistance programs to formally get a marriage license or domestic partnership?

I also have an unusual arrangement with my parents where I pay $500 a month for the student loans they co-signed. Its a big expense for me, without the tax advantages, since I'm just sending money to my parents bank account. Is this going to come up in the loan application process?

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Can you clarify - you say "I net 70k, gross 60k". Do you have the terms reversed (Gross is usually total, Net is after removals)? And, what are you 'netting' out of your check - taxes and health insurance? – Joe Mar 8 at 20:37
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@Joe I was just about to make the same comment. The current wording sounds like OP's taxes are negative. :) – reirab Mar 8 at 20:44
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@rubenvb I suspect he is leaving out property taxes and insurance - so it's not that straightforward. – Joe Mar 9 at 11:59
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@Joe it's not clear but my reading it as he grosses 60K, his parter grosses 40K and between them they net 70k total – frankc Mar 9 at 15:24
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@frankc Certainly possible, though the full stop between the two and use of the singular personal pronoun implies otherwise - but that's why I asked OP to clarify. – Joe Mar 9 at 16:17
up vote 68 down vote accepted

You're making $100k together per year: you're not in the donut hole, you're in the top 25% of all households, and the top 10% of non-family households (as yours would be). To be blunt, you're not in the "rely on assistance" area: you're in the "save up for your downpayment" sector.

My suggestion would be to figure out a way to save more than $200-$400 a month for now. $100k gross income means you have about $8k net income per month; $2k for rent and other necessities means you have $6k per month that you can potentially save. Even half of that - $3k per month - means you have $24000 saved by the end of this year, and $36000 on an annual basis.

As far as marriage or domestic partnership - I wouldn't get into one based on whether it helps you afford a home. It might be a good idea because it helps you handle some of the details arising when you have joint property, perhaps, but not solely for the financial aspect.

And as far as how much home is realistic? $250k is certainly realistic if you can save up enough for a good down payment. Try to get to the 20-25% range. If you're already halfway there, another year of renting won't kill you, and it will mean no PMI and much better rates.

Also consider a 15 year mortgage; we're in the same general income category as you and manage a 15 year on a $250k range house quite nicely. It doesn't add all that much to your monthly payment amount, compared to what you'd expect - particularly since the monthly payment includes property taxes which won't increase based on the length of the mortgage.


Now that we have actual numbers from the OP:

$5000 actual paycheck income (post-tax, health insurance, 401k)
-$1345 Rent
-$ 710 Student Loans
-$ 300 Car Payment
-$ 100 Car Insurance
-$ 140 Cable TV
-$  90 Cell Phone
-$ 300 Food/Groceries
-----------------------
 $2025 Remaining

So, without cutting anything, you have $2k yourself you can be saving. (This assumes your rent number of $1345 is your portion of rent, and not the 100% amount.) That's $24000 per year, just by yourself. On top of that, you've got another $40k or so coming from your partner, at least some of which should be available as well if he/she is going to be co-owning? But if not, at least you have about $2000 a month you can be saving. You could also downsize the car, cut cable TV, downsize the phone, and have another $500 or so available - but it doesn't really look like you need to do that, given how much you have available now.

I'd look at what you're doing with that ~$2000 per month right now, and see how you can free most of it up. You haven't mentioned a few things like utilities, not sure if that's just forgetfulness or if your partner is paying them; so perhaps not all of it is available. But - even $1000 a month is $12000 to add to the $20000 you have now, which makes a big dent in that down payment.

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$8k gross does not mean $2k on rent and $6k savings - at $100k the effective tax-rate is 25%, that means $8k gross, $6k net, $2k rent, $4k everything-else. Saving at least 15% for retirement (Even if pre-tax) cuts into this further. $8k gross with 15% pre-tax savings leaves $5.1k net - after $2k rent that's only $3,100 as an upper-bound for potential downpayment savings, assuming zero other monthly expenses, which is silly. – Dai Mar 9 at 9:43
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"If you're already halfway there, another year of renting won't kill you" - this only applies if your downpayment savings size increases faster than house-prices in the area you're looking over the year - my own local area saw a 10% increase over the past year, that's means an extra $10k would be needed to meet the 20% downpayment on a $500k house. – Dai Mar 9 at 9:45
    
I don't think you're correct that 20% + down yields both no PMI and lower rates. If you just meant lower borrowing costs then yes I agree but in recently shopping for mortgages, the rate of the loan hasn't been impacted by down payment only whether or not PMI is required. – Dean MacGregor Mar 9 at 16:08
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Of course it counts everyone who will live with you. Why wouldn't it? If someone is making income and living with you, either they should pay a portion of things, or you're welcome to give them a pass - but it's not what the assistance programs are for! They're for people who need help. Even with your $70k pretax income you're honestly outside of what I'd consider "needing help"... – Joe Mar 9 at 20:09
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@joe I would accept your answer, but still waiting on account merge. Some of the numbers are still kind of off, but not enough to really matter. The perspective is what I needed. – andyjv Mar 9 at 20:46

I am with Joe.

Just doing some rough budgeting you should be able to swing 2-2.5K per month. Here is how I got that:

You gross 60K, 5k per month. 75% of rent ~1000, 75% of 600 for groceries 450, 75% of 400 for utilities 300, 500 student loan. 5000-1000-450-300-500=2750. Deduct another 250 for gas, car repairs, clothes, hair cuts and you have 2500. What else are you doing with your money?

This is with no help from your partner. I'd ask the same of him, what is he doing with all of his money? He makes 66% of what you do, but is only responsible for 25% of the bills. Combined you could be rocking this at like 5K per month. This is with not working an extra job.

Being a victim is a choice, you can win with money.

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Don't forget retirement savings, taxes, and health insurance premiums, all of which (should) come out of that 5K before the OP sees it. – shoover Mar 8 at 19:16
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OP reports "gross income", which I would argue should include the second and third of the above already be taken out (though 70k->60k seems a bit low of a drop). Retirement savings, for sure, though if you have a short term goal of buying a house I would argue it's okay to forgo that for a year or so at most. – Joe Mar 8 at 19:27
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Gross income specifically means before things are taken out of it. – stannius Mar 8 at 19:55
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@stannius That's a very good point, but the OP clearly has them backwards. ("I net 70k, gross 60k") – Joe Mar 8 at 20:36

I generally agree with the other answers. Regarding the bit about your loan from your parents...

Your arrangement with your parents is certainly material to you getting another loan. The mortgage application will probably require you to disclose all outstanding debt.

Obviously, if you choose to omit it and your parents don't tell, it probably won't come up. But that would be unethical (definitely) and illegal (probably).

Whether this will interfere with you getting a loan is another question, but since it's your only debt it will probably be OK.

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I'm not sure if the US has the same rules about this, but here you are allowed to gift downpayment money to a child or grandchild. I'm currently in the process of buying a house and received a sum from my mother and grandfather which I will pay them back, but we are reporting it as a gift. Since I am also allowed to gift my family members a certain amount of money per year this is not illegal (here), as long as I stay under the limit (or pay taxes over the excess). – Kevin Mar 9 at 18:17
    
It is certainly allowed in the US for people to give gifts to their relatives, including to be used for down payments. I have read that lenders sometimes require letters signed by the gifters, stating that it is in fact a gift and not a loan they expect to be paid back. Of course I am sure some people lie with these letters, pretending it was a gift and not a loan, just as you did. It's no more or less legal in the US than it is in the Netherlands. – stannius Mar 10 at 0:33

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