Mama WIll Pay
A couple of weeks ago, I was working with a first time homebuyer whose purchase was far above her affordability. The multifamily home had the potential to produce rents adequate to support the mortgage and with contributions from her household and very careful budgeting, she will be able to maintain her home. Note that I said potential. There are no tenants. Her mortgage is 3 times her current rent.
When I asked what her plan was if she is not able to get tenants, she said, “Oh, my mother and brother will help me out.” I was puzzled. Do they know that she is expecting them to deplete their savings, their retirement funds, and their emergency savings for her dream? Does she have the right to assume that they will help her support her $3000 plus mortgage payment? Will she pay them back?
Don’t get me wrong if my young adult children lost their job, became ill, or had a true emergency (definition: serious, unexpected, dangerous situation requiring immediate action), I would help. Helping comes after they have used their savings, spoken to their insurance company, and used other safety nets. That does not include when they walk into a situation that they could not afford when they entered it. They are on their own. They know this. They will have to work it out. It is part of being an adult. Sometimes it is painful to watch but it is better for all of us if they learn to navigate life.
As adults, we should be responsible for our finances. Before committing to large, long-term financial decisions, ask yourself:
- What is my current income? Is it going to increase, decrease, or stay the same?
- What are my current expenses? Are there going to be any changes?
- Can my financial situation support the current obligations of this purchase as well as all of my other financial obligations
- What do I have saved for an emergency?
- Are there insurances in place?
- Can I support the maintenance of my new asset?
- Do I need to purchase this or can I find a deal that will fit my financial situation?
- If you are counting on others to support you in the event you cannot afford it, did you ask them and discuss the support that will be needed.
If your first response to “what will you do in the event of financial difficulty” is that someone else will pay, rethink your purchase. A more affordable home would be a better answer for this homebuyer.
Categories: Housing, Home Ownership, debt, Mortgage, credit, Home Payment, Personal finance
Unfortunately, a lot of people feel priviledged even though they do not come from wealthy backgrounds where they have family who can truly assist them. In this situation, your client probably comes from a modest background. To help her, her folks would have to go into savings that are probably modest as well. Learning to stand-up on our own feet financially is something that is not explicitly taught to many of us. It is one of the reasons that "our" community is so mired - not enough people standing independently and maintaining what we have, to say nothing of getting more.
The work you do to educate others through your classes is important. Carry on.
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