Money and Finance

[india7]

Oh, Mr. Topher, sir, oh God of moolah, sir, could I throw a few potential questions out there at you?

Last night, I saw some apartment listings in NY Magazine which I think I could totally afford one day. Not the ones for millions of dollars, but ones that were more within my reach. I don't think I could go for these particular apartments right now, but it did get me thinking about owning vs. renting.

I've never really thought about owning my own apartment, other than my usual lottery fantasy, since I'm always so broke. But being not entirely happy with my apartment building has got me thinking seriously about how long I really want to be stuck renting.

I'll be 43 in a few months, and you know from questions that I've posted here that I filed for personal bankruptcy (four years ago this March). But I'd really like to try and buckle down my finances, quit my stupid frivilous spending, and start to seriously save up for my own digs. It doesn't have to be a palace - it can be a medium sized studio even. To be honest, out of the four apartments I've lived in during my 17 years in NYC, the medium sized studio I lived in for nine years was my favorite apartment, but then again, it was ALOT nicer and well laid out than most studios.

Anyway, what's a good game plan to start with? Should I talk to my bank about how much I'd need to save for a downpayment, or if I'd even qualify for a loan (which I doubt, even though I'm no longer in debt)? Do I start looking around now, even though I have nothing saved? About how much would a down payment be? How long of a mortgage should I go for? I still have another year and a half on my lease, and I still need a couple more inexpensive things for my current place (a new computer desk, plus getting my laptop fixed, to say nothing of a few upcoming vet bills for Edison), so I have time to start saving, but it has to happen NOW.

I'm sorry if these questions seem utterly dorky, but I've never done this before. I've never even looked into it. Any advice would be greatly appreciated!

[topher]

Since you have 18 months left on your lease, I would say you have two things to do: keep you credit clean and save save save. It is no use looking yet because everything can change in a year.

If you don't have 20% down payment, you get to learn about PMI. Basically, you pay insurance for the mortgage lender. If you default , they get money from the PMI holder. I put 5% down on my first hosue.

[india7]

Thanks, sir! Do you have links I could go to to read more about that? Would they have that information at my bank if I sat down with them to get info this far in advance?

ETA: Holy crap! If I stay in Queens, which would be fine with me, do you know I could OWN my own studio in my old neighborhood, pay what I'm currently paying in rent, and have it paid off in ten years time? I must be fucking crazy to rent! Topher, I swear, the saving starts NOW! Thank you for the advice and the encouragement!

[Auroranorth]

India, one place to start is with a budget. Figure out how much you spend and where the money is going. Then you can look at closing loopholes. Save your receipts- it helps track spending.

[india7]

I'm good at saving receipts, cos I know that helps at tax time. But you're right, I totally need to start a budget NOW.

No more wacked out trips to Sephora for me! ;D But this will be SOOOO worth it!

[hamhock]

How does a person with NO credit establish credit? You know how it is, nobody will give you credit because you don't have any, so how do you get it in the first place?
My sweetie has no credit. I suggested he get a secured credit card at his bank.
Anything else he can do??

[Auroranorth]

A secured credit card is a good starting place- make sure the bill is paid on time each month. Also, getting a small loan from the bank and paying it back helps. Topher?

[india7]

Also, if someone in his family has a card, and gets him a companion card. Before totally fucking up my credit, that's how I got my first card, an AMEX. My Dad had an Amex, and because his credit was so good, they offered to give an Amex card to anyone in his family - it would be that person's card, not the original card holder's. So in other words, if I didn't pay my bill, I was responsible for it, not my Dad. So I got my Amex and that was my very first card.

SQUEEEEE!!!! Yesterday, I opened up a second savings account to be used for my apartment purchase fund only. It has a whopping $40 in there, but it's a start - I'll be able to add more in later. I went to Bank of America, where I have my checking and regular savings, and explained that I wanted something like a passbook savings. My reasoning was that I wanted something that would be hard for me to take money out of on a whim, like my regular savings which is linked to my checking. I can access my regular savings by my card, anytime I like, so if I wind up tapping into my savings for stuff, I'll never get anywhere. So I wanted a seperate savings, for the apartment purchase only, and that's what I have now!

[Sunnyhorse]

India7, does Bank of America in your area have the "Keep the Change" program? We've got our debit card tied into the program so that if we spend, say, $7.49 on something, BoA rounds the total up to $8 and puts the extra 51 cents in our savings account. For the first three months of the program, BoA actually matched what we put in through round-ups. It's not a huge amount of money, but every little bit helps, and it does add up.

That said, I was just reading someplace that cutting out a daily Starbucks fix could help you save as much as $13,000 over 10 years. Talk about an incentive to stop spending on piddly stuff!

I'm really excited for you and hope you'll accumulate savings fast. Best of luck!

[Deleted]

auroranorth said:

India, one place to start is with a budget. Figure out how much you spend and where the money is going. Then you can look at closing loopholes. Save your receipts- it helps track spending.

I highly recommend Quicken for keeping up with what you spend your money on. It also has a place to enter in all debts/assets so you can keep track of your net worth. Yes, it can be a little tedious entering in absolutely everything that you spend $$$ on, but it is very easy and it has kept me from making alot of dumb purchases.

Hamhock, I am of the Dave Ramsey school of thought that you don't NEED to build credit. Because the only reason to build up your credit is to go into debt. You can get a mortgage without havig a credit history- you might have to shop a bit and find a lender that is willing to look beyond your credit score- they are out there. To look good for a mortgage, he has to pay all of his bills on time and have a nice savings acct. saved up.

I have a Shell credit card that we pay off every month, but that is more MrB's bag than mine. He likes the 5% back on gas. I don't necessarily agree with Dave Ramsey that no one can handle a credit card and eventually you will get burned- I have not yet. But now that I have said that, they are going to lose my next payment and charge us interest out the wazoo, probably!