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Reserves and mortgage

Valued Contributor

Reserves and mortgage

Advice please! If I live pretty much paycheck to paycheck , do save for retirement but that's it and pay all bills with a good credit score and career will I never qualify for a mortgage ?
Message 1 of 5
Established Contributor

Re: Reserves and mortgage

Do you have money for a down payment or do you qualify for USDA?

Starting Score: 6/17/15 EQ: 589 EX: 593 TU: 579
Current Score: 5/22/16 EQ: 703 EX: 697 TU: 713
Goal: 700s by June 2016
Message 2 of 5
Valued Contributor

Re: Reserves and mortgage

There are programs such as FHA that only require 3.5% down, if you are a veteran or married to one, there are 0% down veteran loans, USDA loans, and other programs that other members on here may know more about, plus in certain locations you may qualify for downpayment assistance programs depending o income levels.


Assuming your financial credit profile is in order.


Other than this, you should find a way to maximize income (make more money)--may be a longer term goal--through more education/training, part time jobs etc and at the same time minimize expenses to save more. Having a combined income marriage also helps to pool resources of two people.


I too thought about saving for retirement and saving for a downpayment. In my situation we generate enough money to do both--we maximize both of our retirement accounts (we have 401k, IRA, multiple annuities, retirement accounts and pensions from part time teaching jobs for the state univ system) and have enough left over to give some to our parents (and pay our bills), so we are able to do both because we generate enough income. So to answer your question, the simple Truth is, you need to find a way to generate more income. We were fortunate in both getting and education and getting into fields that paid relatively well..we together generate $300K in income before taxes. 


Anyway, you Can do it, just plan and think about your next steps to bring in more money and soend less or spend on what you need, plus if you can, extras to enjoy life.


We are going to app for a mortgage this summer. But I heard it is a seller's market, so depending on our hunt, may defer until the market cools off here in So Cal.


Message 3 of 5

Pay yourself first

You certainly may get approved for a mortgage without having any significant reserves, but then what happens when the air conditioner goes out? That's no good, so the question becomes "how can I achieve some savings?".


For many years I found that I could pretty much always just pay the bills, and had almost nothing left over to save. What was interesting was that if the car broke down, I'd manage to pay to have it fixed, and have nothing left at the end of the month; if I recieved an extra $400 somehow, I'd still still barely squeak by.  In other words, it didn't matter if my income for the month was a bit higher or lower than normal, or if my expenses were a bit higher or lowe, I'd always pay the bills - barely.


So I tried an experiment. I opened a bank account in a town 30 miles away. I didn't get a debit card or checks for that account.  Then as soon as I got paid, I immediately mailed in a $250 deposit. Even with that $250 "missing", I managed to pay the bills - barely. I did that for a few more months - first, mail off $250 to the savings account, THEN pay the bills. That continued to work, so I increased it to $400 each month.  Each month, I'd FIRST send $400 to savings, then manage to pay the bills. 18 months later I had $8,000 in savings.


Since then, I took a very popular class on home finance at budgeting when it was offered at a local church, and we did a monthly household budget each month for several months. In our budget, the FIRST item was savings, then housing, food, gas, clothes, recreation, etc. The class was very good, not only to get us on the right track for our finances, but to get my wife and I on the SAME page about money. 

Message 4 of 5
Super Contributor

Re: Pay yourself first

there are some situations where reserves are required. but most straight up deals do not require any at all....


Retired Lender
Message 5 of 5
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