YNAB You Need A Budget

[vcarpenter34]

We have a unique situation and I want to make sure that we handle it properly. I am hoping someone on here can give me some advice on the best way to structure our budget for the short term. I will try to make this as short as possible. (Brief history) We have never followed a budget and have had some bad situations in the past. We had to file bankruptcy about 6 years ago and lost our house, etc. We downsized and worked through it. Now I am in college for a degree in architecture and my husband has a great job making about $65K a year with great benefits. I own a cleaning service too but I only work one day a week now. My husband's grandfather passed away a couple of years ago and left his home to his 2 sons, Jim (my father-in-law) and his brother Bobby. Since then Bobby and his wife have both passed away. Their 3 children, in turn, will now inherit Bobby's half of the estate. None of them live close by and are not interested in the house at all. They only want money and are willing to settle for a very reasonable amount. Once the estate money ran out, my father-in-law, who is disabled, moved into the house not able to afford his apartment and the upkeep on the house. He asked us to move in with him to help take care of him. We love the house and want to own it. The house has a tax value of about $224,000 but has never been renovated since it was built in 1958. The 3 cousins are willing to take $15,000 each ($45K total) for their portion. We are wanting to get the house deeded to us so we can mortgage the house to pay off the cousins and renovate the house as well as possibly pay off our other debts. We are currently behind by about $2000 (due to extremely high power bills this winter and having to get the house to a livable condition). Should we borrow enough money to get caught up and have our finances are "clean" as possible for the mortgage to go through? We will have 100% equity to use and are hoping to mortgage somewhere between $100-$130K depending on what all we would like to pay off. We could just be patient and try to budget over the next several months but I am afraid some payments may be late and will negatively affect our credit. Anyone have some suggestions? vcarpenter34

[heathler]

This is tricky. Both late payments and new debt will ding your credit score. I'm not sure which is worse, but my gut feel, especially given the past bankruptcy, is that the late payments would be worse. I haven't tried it myself, but others on the forum have recommended creditkarma.com for helping estimate your credit score. You may be able to go play with some different scenarios there. It also may be worth looking for a mortgage broker in your area to consult with.

[vcarpenter34]

Thanks heathler. Right now our scores are "ok". Mine is somewhere in the mid 6"s and my husbands is in the low 7's. I will check out creditkarma.com and see what it has to offer. I have been shopping around for a bank to work with us but have run into an issue. Most banks have a waiting period of 6 months to a year of having ownership before you can mortgage to cash out. I have talked to one broker that said he can help us but the interest rate will be a little bit higher... he said probably somewhere around 4.1 or 4.2%. It might be better just to wait it out (if the cousins are willing to wait for their money).

[tindelsurf]

It sounds like you haven't been using YNAB until now - I'm guessing if you use YNAB you will find that $2k in short order - really - you may have that money right now. After that - do you think your cousins will give you a loan and let you make payments to them with an even lower rate - say 3%? I'm guessing the house is paid for right now. You could probably pay them pretty quickly once you graduate. That way you don't even go into debt on the credit score - but you have to make every payment to your family on time to keep from 'Christmas Dinner tasting bad' as Dave Ramsey would say. Do you have anything you can sell to help you along - a motorcycle - a boat, something like that?

[vcarpenter34]

I have just downloaded the software a few days ago and now I working on figuring it all out and watching the videos and webinars when I can. Dealing with family can be very tricky. Im not sure what they would think about letting us make payments to them. It could work if they were willing to work with us. No we don't really have anything to sell. When we lost the house 6 years ago we sold everything we could because we were moving into an apartment and didnt have storage space and we needed the money. We filed for bankruptcy 6 years or so ago because my cleaning business (that once did very well) started to crumble. I lost over half of my income 6 months after attaining our first mortgage. We tried to hold on as long as we could but we just got too far behind to catch up.It was an adjustable rate mortgage too and once the interest rate went up there was just no hope. Im on a mission to learn to manage our money more maturely so we dont make the same mistakes again.

[tindelsurf]

Start with Dave Ramsey's Financial Peace University... gives a lot of basics - I don't agree with everything, but it's a good place to start. If you can get a loan for 4ish% I'd jump on it if the family isn't too stoked on it. Any chance your father-in-law could pay the $45k in exchange for you taking care of him through the rest of his life?

[sarham]

I agree with tindlesurf that considering a mortgage in the 4s is a good idea. Honestly, we bought our house a while back and would love to drop from the 6 range to the 4 range. I recognize it isn't the best right now, but still worthy of thought. GL!

[vcarpenter34]

Hi tindelsurf.. No my father-in-law is disabled and lives off of social security. He does play the lottery regularly so maybe if he hits big he will help us out. Hahaha! Yeah sarham... the 4's aren't so bad. Its all just a big jumbled up legal mess right now. I can't wait for it all to be over so the real decisions can start to be made. If everything works out, it could really be a blessing for us. Now I just need to the know this software and to learn all I can about budgeting to keep us on the right track... no matter what happens with the house.

[caligulala]

Hey Vcarpenter, just wanted to say that I've been through bankruptcy due to the same reasons. We're doing really well now. Stick with YNAB and check out the Dave Ramsey stuff. He is a good place to start when you need to get your head around some basics. Good luck!

[bookman413]

You really ought to be talking to a tax and estate/inheritance lawyer to go over tax and inheritance issues involved in this situation to make sure there's nothing you are missing from legal and tax standpoint. However, it's great that you are going to get a 200K (assuming tax assessments are somewhat in line with the property market) house for about 45K....fantastic... even if there are upkeep issues.

Bite the bullet and pay for legal and tax advice to help you through these negotiations and the financial transactions. It's enough money that it's worth it for security's sake and so you are less likely to miss any angles that may affect you in unexpected ways.

[vcarpenter34]

I agree bookman413! I know someone who is a lawyer and will hopefully help me or send me in the right direction for the right people to talk to. I am hoping to know more in the next day or two. And yes, it is a real blessing... at least it could be, if all works out like its supposed to. The house needs renovating and the yard needs work but will work on it a little at a time for now. Major stuff will come with the mortgage. Thanks for the advice!

[vcarpenter34]

Hey caligulala... bankruptcy sucks huh?! We are doing better too but its still week to week right now. How long did it take you working with YNAB to get things really in order?