Warning: Longer (than usual) post
I must admit, I am writing about our plans for the next 7 months with a bit of trepidation. I have put it off for a while, even though “The Plan” has been in motion for nearly a month. Part of the reason for this is that I wasn’t sure “Stage 1”, a vital step, would be successful.
The bigger reason, however, is that our plan involves some risk-taking. Since everyone is different, I know there are many who are not comfortable with risks.
I should be able to stand up and say that I am 100% confident in our plan, which Jesse and I have talked about over and over until the cows came home and then had time to leave again. But I’m not, just because I know there will always be room for error, leaving me only 95% confident.
That 5% of uncertainty is what leaves me feeling open and vulnerable to criticism. It doesn’t always help that most of me knows that this is the best course of action for our family– there is some room for doubt, which is what causes me to listen too attentively to the feelings/thoughts/well-meaning-advice of others.
This is probably what led to my snarky drive-by reference to Dave Ramsey a few posts ago (it could also be that I like to be controversial in how I say things…). For clarity, I wanted to mention that I am not saying Jesus “told us to buy a car”. Also for the record, I like Dave Ramsey. He has a lot of good advice. But I get nervous when I hear people quote his maxims, as though he is a “way of living”. I would get nervous if it was anyone– whenever people start to follow one person’s advice to the exclusion of all/many other factors, it reminds me of a cult. I’ve seen it happen over and over to people in my life, and it makes me very nervous. Personally, I like to get many opinions and research many options (I’m one of the rare personality types that thrives on this instead of getting overwhelmed), but I always try to counter-balance. From what I know of Dave Ramsey’s background, he needed a drastic approach in order to curb his bad habits. Do we all need to apply the same drastic approach? I think it needs to be on a case by case basis, taking many things into consideration. My “approval rating” is based on whether or not Jesse’s and my decisions helped or hurt or family, taking the whole picture (not just finances) into consideration. But that doesn’t mean I don’t nervously anticipate criticism about car payments. See what I mean, about my own personal trepidation?
Back to The Plan: I debated not sharing any of it here on my blog, just saying a few bits and pieces to friends on a personal one-on-one basis. I’ve been doing that for a while now, but let me say, it gets tiring repeating the same information over and over. And we keep getting asked: “So, when are you guys moving out from your parents again? Are you renting? Are you buying? Before or after the baby?”. Since I can only tactfully evade that question for so long before having to launch into an explanation, I thought I would at least divulge the cliff-notes of our plan here.
When we looked at the vast and stressful task of moving with a child (ren) (you might think, having moved 5 times, twice across the country, that we would be old pros by now. This is, sadly, not the case!), we decided that the best times would be during Jesse’s and my school vacations. We have Thanksgiving, Christmas, Easter, and Summer. Both Thanksgiving and Christmas would be do-able, but also hectic (probably ruining our family time!). Easter break is spoken for, as lil mr. or mrs. SnowCone is due to arrive then. Early summer, however, is wide open.
Our thoughts have turned towards buying ever since the market in CA took such a downward turn. I never could have said this 5 years ago, but we can now buy a starter home on the Central Coast for somewhere in the $150k-$250k. Also, funny thing about CA– when you rent, you need a CRAZY LARGE deposit! For most of the homes we were looking at, it was between $3-4k just to move in. Add on to that the fact that while home prices are going down, rental prices are going UP, and we started slowly coming to the conclusion that buying was going to be the best option. Add onto that how we’ve always wanted to buy a home and stop wasting a thousand dollars every month on rent, and the decision was made.
As hard as it is to finally make the decision to buy over rent, we knew that hardest part was still to come. There is the matter of financing. It has been 4 years since we tried to buy a home in TX– soooo much has changed since then, that I knew our options would be different and more limited.
So, the first task was to find a knowledgable mortgage broker. A friend of a friend came to us highly recommended, and the process began. After working non-stop for two weeks with Steve Dinelli of Broadview Mortgage, we were able to see all the options clearly laid out on the table. For us, in our pay bracket, the FHA loan is available. GREAT news, in that we will only have to provide a 3% down payment, without having to deal with mortgage insurance. Also the FHA financing rates are fantastic.
Since our credit needs to be higher in order to qualify, Steve and I began to brainstorm options/ways to get our scores up. While this is a long, risky and arduous process, I KNOW that the results will be worth it. For instance, if we save even 1 point on an APR, we will save tens of thousands over the course of our home loan. Worth it!
We’ve known since the accident in July that we would eventually have to buy a car, one way or another. Although we’ve been saving money every month, we haven’t known exactly what it was for. Car? Rental deposit? Home down payment? Pay $5k for a midwife?
When we found out that we needed higher credit scores to qualify for a home loan, I started researching ways to boost our credit scores. This is part of my “5%” of doubt. I HATE HATE HATE the credit game, mostly because it plays off of “Man’s” rules instead of God’s. It doesn’t reward those who live within their means, it punishes them. For instance, when we paid off– not cancelled!– paid OFF our credit cards a while ago, our score went down! Those who don’t pay off their balance every month have better credit scores than those who do! And don’t get me started on what your score is if you’ve never even HAD a credit card or loan of some sort! Shouldn’t that be a GOOD thing?
Playing by these rules makes me mad. But refusing to play the game just to “stick it” to America’s credit system is only going to hurt our family, since we’d have to pay more per month for a decent living situation. So, I bit the bullet and decided to “figure it out”.
Since we need a car, I looked into what it would be like to finance one on our credit. Since I don’t have a credit card of any sort in my name, I also looked into what I could do with that.
This is how I came up with “The Plan”. I ran it by Steve a few weeks ago, and he said that it was a great one, and pretty certain to work.
Stage 1: Boost our credit scores. Finance a car that we can pay off early in Jesse’s name. Apply for a credit card in Kelly’s name. Obviously, we tried the “under $7k” used car approach first. When that didn’t work, we went up to the next price bracket with our used Rav4 that will last us many more years than a car with 100k+ miles would have. Luckily, as I already explained, we got a GREAT APR– almost 0%– so we aren’t paying too much extra. And that’s IF we don’t pay it off early.
As far as credit cards, I was already pre-approved for one that would be attached to my bank account. Jesse has this same one, and we use it and pay it off every month. We also win lots of rewards with this card– for instance, we currently have around $100 in rewards that we can get back in cash or gift cards (if you receive any sort of Christmas gift from us this year, you can thank our Chase Rewards for supplying it!).
The other thing I love about our Chase card is convenience. Since it is attached to our bank account, I see it every time I log in to our checking. Paying it off is as simple as two clicks– no separate log-ins, no mailing checks, etc. This is the reason it has been a cinch for us to pay off every month!
In case you haven’t noticed, we’ve completed Stage 1, which is a HUGE monkey off of our backs. Like I said, the older/cheaper a car is, the harder it is to finance! Makes sense when you consider that a bank is taking a risk and wants a reasonable investment. DOESN’T make sense when you take into account that a cheaper car is a smaller expense for the borrower, giving them a greater probability for success.
Stage 2: Wait 6 months. This is how many months it takes for a score to go up after opening new accounts and paying them faithfully. Steve said that in his experience, a score will go up 50-80 points. Perfect, just what we need!
These next 6 months will also be the time that we finish saving our 3% down payment for a house (about $7k, since most of the homes we’ve looked at and liked are around $180k– about $900/month in monthly mortgage payments) and pad our savings account. We are also continuing to aggressivelly attack our student loans, double-paying “the baddies”, as I like to call them.
Waiting another 6 months will be a challenge, but not impossible. Although many people warned us about the stresses of living with my parents, so far it’s going GREAT. We have 3 rooms to ourselves, and it feels very private. Gregory gets so much quality time with his family (part of the reason his vocabulary has been exploding!) The most stressful part of it all is that my sister and I tend to fight, which happens all too often because we are so similar in so many ways 😉 Oh well, now that SnowCone is taking over my body, I won’t be able to “steal” Janelle’s clothes for too much longer!
Stage 3: Find and buy a house! Since we already have all of our paperwork completed, all we need is to re-check our credit score in May and proceed! We already have a few realtors lined up. Our goal is to start seriously looking at the end of May, and close on a home some time in June! We will have the whole summer to move in, little by little.
Well, there it is, folks. It’s risky, it may fail, but it’s a plan nonetheless! To quote a prayer my dad said for us at In-N-Out right after helping me buy the car, “Lord, help our weaknesses. Where we have failed to measure up, forgive and compensate”.