My New Thread

[Magic Johnson]

I'm not going to get financing that requires a balloon. I've decided that.

I'm going to seek financing through Greenstone Farm Credit Services, and they are the best in the business of agricultural lending. They have a homeowner's program for rural home buyers, and they have 30 year fixed rate mortgages available. Greenstone understands PA 116 very well, they probably deal with it at some level most days. I don't know what Greenstone's DTI requirement is.

My sister agreed to sell her house for the full asking price of $59,900. They buyers agreed to buy the house "as is". My sister has 25 days before close, then 30 days to move out.

I talked with my sister on the phone this morning. I told her to take the net proceeds from the house sale, and invest all of it, and rent from now on. (my sister has very little saved for retirement). My sister said that she wanted to pay off her vehicle loans and credit cards first. I told her to get a $6,000 Roth, and put the rest into a traditional IRA.

[disneysteve]

Obviously it's impossible to give good advice with extremely limited information, but that said, here are a couple of thoughts.

The annual IRA contribution limit is $6,000 ($7,000 if you are 50+). So she can fund an IRA now for 2022 but that's it. She can't put the max in a Roth and also put money in a traditional.

If she is no longer using credit cards to buy things she can't afford, putting money toward paying off the CCs would probably be the way to go since those interest rates are typically in the 19-29% range. That's a much better return than she can expect from her IRA.

Whether or not she should pay off the vehicle loan isn't quite as clear cut. It depends on the rate and her overall situation.

Does she have an adequate emergency fund? Any other debt? Is she living on a good budget that has a monthly surplus? How will her budget change when she goes from owning to renting? Lots of things to look at before making a blanket recommendation that she invest all of the house proceeds.

[Magic Johnson]

I understand everything you said DS. And I agree with all of it. I’ll try to find some answers from her.

[Magic Johnson]

I reread what you wrote and understand it better.

There's absolutely no reason to not max out a Roth at minimum asap. I know that her net proceeds from the house will exceed $6,000. That's the right, and first thing to do, because of retirement needs, right?

She'll probably still be using credit cards to buy things she can't afford. She's almost certainly in that at least 19-25% range.

I still think she should not pay off the vehicle loan. She probably got an OK rate when she went to buy the car. She's never done anything really, really stupid like declare bankruptcy.

EF = $0.00, no question about that.

She has student debt, but I don't think much medical debt.

What's a budget? Surplus? HA!

Her budget will actually increase when she goes to renting because my parents gave her the house outright probably 12 years ago. Decent places rent for between $450-$750 around here. She's moving, but only about an hour's drive from here.

She's trying to make it as a professional writer. She's a good writer, but not THAT good. Fortunately she's never been married, and she has no kids, so she only answers to herself.

Her big brother is trying to look out for her.

What say you Saving Advice?

[Jluke]

I would be sure her income qualifies her for Roth contributions.

[james.hendrickson]

I'm not going to get financing that requires a balloon. I've decided that.

Way to avoid the balloon payment - that sounded really stressful to me.

[disneysteve]

There's absolutely no reason to not max out a Roth at minimum asap. I know that her net proceeds from the house will exceed $6,000. That's the right, and first thing to do, because of retirement needs, right?

I would not fund a Roth before funding an emergency fund.

She'll probably still be using credit cards to buy things she can't afford.

If so, using the money to pay down her balance is a waste of time in the big picture because she's just going to run it up again.

EF = $0.00, no question about that.

What's a budget? Surplus? HA!

She's got far bigger problems that she needs to worry about before she goes dumping money in a retirement account.

Her budget will actually increase when she goes to renting

She needs to nail down what her actual expenses will be. Until then, I'd do nothing with the house proceeds. Park that money in a good savings account like Ally or similar and don't touch it.

Her big brother is trying to look out for her.

Has she actually asked for your help and advice? If so, tread carefully. As you've demonstrated here, people don't like when the advice doesn't fit what they want to do. You don't want to see her make bad decisions but you also don't want to alienate her by pointing out those decisions.

[kork13]

I don't always recommend it for everyone, but she's a great candidate for working through Dave Ramsey's "Financial Peace" classes. I forget the cost ($100-$200?), but for folks with no financial sense or direction, abusing debt, making bad financial decisions..... His course is a great option. Plus, on the relationship side, it's alot safer for you to point her in that direction, because you won't be the one telling her she's screwing up her money -- it's an authoritative stranger.

Normally I'd suggest you can buy it for her, but knowing you're working on your own finances, maybe better to let her but it herself (it's a worthwhile investment). To help support her (and for your own good too), you might even be able to work through the class together with her.

[disneysteve]

Or maybe you could both do Dave’s class together. You need it as much as she does.

[Magic Johnson]

Ok, I’ve read everything. I understand.

[LivingAlmostLarge]

Why doesn't she move in with you and split expenses? I was on the other thread going to suggest if you buy the farm and can get a loan get a roommate. Time to start renting out rooms to afford it.

That being said does she have a budget? If she could contribute $300/month and then half the bills it wouldn't be a bad idea. Or any roommate. By the way you don't need to get a roommate paying FMV just one paying something to help ease the budget.

[Magic Johnson]

My sister is moving about an hour away. She’s lined up a new job.

[LivingAlmostLarge]

My sister is moving about an hour away. She’s lined up a new job.

Does it have a potential to make her more money? Is that why she's selling the house?

[Magic Johnson]

I called my sister, and left a message. My message was, basically:

Invest $6000 in a Roth. I tried the best I could to explain the tax benefits.

Establish a $1000, then forget that you did that until needed.

Treat yourself to something small - important to many people so they don’t feel deprived

Decide yourself what to do with the rest

Check out Dave Ramsey

I also apologized for sounding like a know it all jerk yesterday.

[Magic Johnson]

Hello Saving Advice.

I had a very big week, and I chronicled some of it here. During the process of trying to secure a mortgage, I had three companies bidding for my business. Two of them were legitimate financial institutions. The third was shady. I was having them bid, as a last resort, because I knew they would approve me because I knew they were shady from the beginning. What they didn't know is that the house was enrolled in PA 116 - which is extremely rare, especially for a shady mortgage company. And me knowing about PA 116 and Frank Dodd was also rare.

So, this shady mortgage company told me that I had been "preapproved with flying colors", which, of course I always knew was untrue. Anyway, they made me a promise that they couldn't deliver on, because they had no idea that the property was enrolled in PA 116.

I knew the whole time that the property was enrolled in PA 116, but I had no idea about the lending ramifications for a house enrolled in PA 116. One of the legitimate banks (a rural bank, familiar with PA 116) told me that my only option was a balloon.

So, immediately, as I found that out, I asked the shady company if they lent for a house enrolled in Michigan's PA 116. (of course the low level idiot I was dealing with had no idea what I was talking about).

I knew that they were in violation of Frank Dodd. I think you can figure out the rest.

I'm sending an email to my real estate attorney on Monday (he's well aware of the situation right now). But we haven't talked settlement at all yet. Take a look at the attached spreadsheet and let me know what you think.

I have no interest nor the energy in being a "giant slayer" or in a multi million dollar settlement, but at the same time, I want to be compensated.

house updates (septic, well, furnace, appliances, remodel)	$200,000
debts	$20,000
kids (4)	$400,000
attorneys (family law, real estate, estate planning)	$30,000
taxes	$290,000
Total	$940,000

I almost forgot another significant "one in a million" details. I own the house outright, right now, and I didn't know that until yesterday at about 4 pm. All I can do is speculate.

When we divorced 13 months ago, I had a strategy. Let her keep the house, and I keep more of my 403(b). She was awarded $119,949 of my 403(b). Her attorney didn't want to handle the QDRO, so she referred my ex to another attorney to do that. My ex got busy or whatever, and never followed through (she's smart, but scatterbrained). So, I still have $119,949 of her money growing in my account. Whenever she gets around to collecting it, it's hers.

As far as the house - I knew she couldn't or wouldn't live there forever, because it's my family's house (her ex, whom she hates). It took her 13 months to get her $hi* together, and decide to move out. I made sure to get first right of refusal on the divorce decree. Of course, I've always been willing to pay FMV for the house.

When we divorced, we owned our house outright - no mortgage. It was owned by our living trust, which dissolved at the moment the divorce was final. What I'm about to type is pure speculation (I have no idea).

Some low-level County clerical worker had to assign ownership of the house to someone and he or she assigned it to the person whose last name was on the living trust - me, not her.

I own the house outright, right now, and I've only known this information for 12 hours.

I have no idea what to do, which is rare for me.