There are two ways to beat the banks, as I see it: minimize the amount of debt one accrues over one's lifetime, and pay down debt faster than the schedule dictates. A mortgage is for most the biggest debt they will assume. I'm trading in some pride and independence and recently moved in with my parents to save money for a down payment. I feel pretty emasculated by this, since I'm in my late twenties, but then again I have a couple friends who overextended themselves and have already been foreclosed on. Where I live in Chicago, landlords were jacking up rents because so many people are renting now. I guess I stayed ahead of the slave drivers again (didn't buy during the boom), but at the loss of some dignity. My planned downpayment will exceed 20% and I hope to get a ten-year mortgage for the remainder and pay that at an accelerated pace. The price of the property I buy will not exceed 3x of my income.
Beat the banks by moving in with mom and dad
By Wacking Hut Follow Sat, 15 Oct 2011, 10:34am 4,032 views 37 comments
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Santa Cruz, CA
You are smart. The problem is women will try to convince you into buying the "nest" for your future happy family. I would suggest you sock away a chunk of change in a Roth IRA asap and then save for the down payment.
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madhaus's website
New 2010 Census data show a big increase in 25-34 year olds living with parents. Not all of them are doing so to save up for a down payment, but you're definitely not unusual. Bad economic times mean fewer households, and it's also burying the real poverty rate. (A single or couple earning poverty wages living with parents who aren't poor shows up as a non-poverty household.)
What you're doing is very common in first generation Asian families here.
The US continues to emulate Japan 10 years ago. Our 20 and 30 somethings will also become the "buy nothing generation" as a reaction against their parents and older cohorts' conspicuous consumption.
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Really smart one's will stay with the parents until baby boomer grandparents kick the bucket then take their house. Assuming the grands aren't remortgaged/heloced out.
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My boomer parents are pretty healthy so waiting for them to kick the bucket is impractical.
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Yorba Linda, CA
I'm 30 and would not voluntarily choose to move back in with my parents. That is social death.
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Boca Raton, FL
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It used to be an embarrassment for a man over 22 (past college) to be living with his parents. Now it's the norm. What are we Italy? Well, at least I like the food.
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It's not the American Dream to live with your extended family, but maybe the Dream has to adjust to reality.
That said, I would rather live in a run-down trailer than live with my parents. I love them in doses of a few hours at a time.
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Boca Raton, FL
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thunderlips11 says
I'd rather adjust reality to optimize the welfare of the 99%. Back in the 1950s a single income allowed a middle class family to own its home, vacation, and sometimes have a second vacation home. Today, a dual income family lives paycheck to paycheck at the brink of insolvency.
Today's worker is many times more productive than his counterpart in the 1950s due to amazing advancement in technology. So, if the worker is producing more, why isn't he wealthier or at least as wealthy as before? Because of all the parasites sucking his wealth away, particularly his employer.
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How can parents deal with the ear-shattering sound and house-rattling impact of young people pestorking? Are young adults today supposed to be celibate? Find roofs of abandoned warehouses in dying industrial zones to have sex?
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madhaus says
I even know non-Asians who did this -- friends of mine whose families lived in their grandparents' house for a few years before their parents bought their own house. Free child care, for one thing.
thunderlips11 says
Ditto to both.
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Wacking Hut says
Young man you have lost no dignity here. You've done the right thing. Man has all the dignity in the world when he owes nothing to anyone, and has no dignity when his entire life and future is owed to the bank.
You've done the right thing.
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Oakland, CA
I graduated from UCLA back in 2004 and spent 3yrs living with mom and dad which was enough time to accumulate DP for my first home. Nothing wrong with that as it's typically very difficult to accumulate DP if you are on your own paying for everything, even if you are living within your means and have a good job... The money can accumulate quickly if you aren't paying rent and mom and dad are paying for food.
Best of luck to you.
Luke
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lol my parents charge me market rent, food and utilities if I live with them. I might as well move out.
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Nothing wrong with saving money for anything these days. The social ramifications are gone..cell phones and facebook for starters.
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44 male
Egg Harbor City, NJ
Wacking Hut says
Thinking about helping them to heaven? There's better ways to get a house.
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Sacramento, CA
that dog don't hunt for me.
as much as i wanna beat the banks, i'd rather find a crappy room to rent in a crappy house than live with the parentals.
but i like your plan of attack!
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Just move into an empty foreclosure and rent rooms to poor people.
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Monterey, CA
Wacking Hut says
Nice job. Seriously. Nice to see someone using their mind and not getting caught up in debt.
Make sure you help your folks out with maintenance and stuff (if they don't charge you a dime) - you're lucky to have them around to help you out.
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Alexandria, VA
You're blessed if you can live with your parents. Be a good kid, help them as much as you can while you're with them. Do save and buy what you want, don't forget to invite them, treat nice dinner for them.
Unfortunately, not all are that lucky. Some people don't have parents to live with any more. Few kids are dreaming of getting the hell away from their parents. Some can't stay with them for some reason, others have no choice but to stay with them. Sometimes, life sucks.
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Santa Cruz, CA
Living with the parents is quite normal in other cultures until marriage. It's no big deal.
There is a reason they invented motels, they're handy for the rendezvous with the girlfriend you can't bring home.
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Oakland, CA
You should learn the difference between good and bad debt. That's the way to beat the banks is know how to play by their rules.
What you're doing is trying to avoid playing at all which at least guarantees that you dont lose but you dont exactly win either.
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Good plan. Multi-generational households have fallen out of favor in usa, but there is much to recommend them. Honor your parents, while you still have the chance. It is also a good chance to chip away a bit at the narcissism that has taken over us. As regards getting back at the banks, the best way to do it is take out a 30 yr. mortgage, and pay it back in 10 yrs or whatever makes sense. The bank hedges a 30 yr asset with a 30 yr liability (internally), so by paying early you throw a wrench in the works. By taking out a 30 yr. mortgage, you also commit to a lower monthly payment, which may prove helpful at some later point. You never know what may happen 8 yrs. after you sign the papers, and having the flexibility to cut back an over-payment to only what is mandated may be a plus. My .02$
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seaside says
A simple alternative is to live in a house sharing situation with others in the same boat. Thats how I did it back in the day.
Many benefits... start networking for your career, easy dates, and low housing bills. Downside... house mates may not be that mature. But it all works out as you save and keep a focus for the long term goals.
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Saving money isn't worth being miserable living at home, at least for me. I'd rather rent and still have my personal freedom.
There's a reason why the "I bet you still live in your parent's basement" line is an insult. Time to spread those wings little bird. You can save money without piggybacking on your parents.
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What have you been doing for the last decade? I know you want to save but it can be done without being a burden to your own parents. It's smart in a moochy kinda way...
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You can always lease a cab with a buddy and work iron shifts in tandem. 12 hours on the hack. Eight hours at day jobs. Four hours sleep and shower. In a longer lease arrangement you can just keep clothes in the trunk. If you can work for completely cash jobs you can get some money together quickly, especially if you just get a post box and live in the cab.
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Oakland, CA
thomas.wong1986 says
that's a good idea but I would buy the house rent out rooms and live for free.
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Baltimore, MD
clambo says
I agree.
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Baltimore, MD
debtregret says
That's what McMansions are for (or will mostly be used for in the future).
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Baltimore, MD
APOCALYPSEFUCK is Tony Manero says
Really depends upon who your parents are. Mine wouldn't have cared if I brought women over and they screamed their head off while was banging them.
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44 male
Egg Harbor City, NJ
Wacking Hut says
The problem with this wonderful strategy is sometimes Mom and Dad do not want you to move in. While they are willing to help you out if you fall on hard times (ie lose your job), but sponging off them because your too cheap to rent your own place wouldn't sit well with some parents. While you ultimate goal is save up enough to buy a house in cash (or a sizable down payment) I'm not sure all parents are willing to put up with you for years while you save.
bob2356 says
The Really Really smart ones help the parents along. Doctor at hospital, "Sorry to tell you this but the 3 flights of stairs you Mom fell down killed her. And so soon after the passing of your father who electrocuted himself trying to toast bread while in the bathtub."
Wacking Hut says
That's why they need your help to get to Heaven.
Future Cash Buyer says
My cousin's Mom kept raising his rent until he decided it would be cheaper to live elsewhere. I guess that's the gentle way (and profitable) of getting your kids to leave home.
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San Francisco, CA
PRIME's website
If you are in your late 20s and haven't saved up for a 20% down-payment yet, you should look at your spending habits. Unless you have been in school for a while (getting a PhD or something), you probably should have saved that amount already.
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Buffalo, NY
clambo says
Only if he goes for a dumb woman, but if she has a nice body, men usually do. A smart woman who wanted a family with him would seek a reasonably priced home with enough room (a one bedroom isn't good if you both want two kids) , but not fall prey to all the stuff that goes with it. School districts are not worth debt slavery, when there are online schools that are free or very cheap, yet provide a good quality education. So long as a car is safe and suits it's utilitary function, it's best to get the least expensive, regardless of what the broke neighbors think. Learning to do basic maintenance (both of them) is a must; professionals handipersons are for cracked ceptic tanks, not clogged toilets. The female desire to have a nest and raise a family is not the problem; it's the imaginary lifestyle that goes with it that bankrupts.
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Madison, WI
Don't even think about worrying what others think about what your doing, your parents know they can kick you out anytime, they know it's temporary, and they also know things are not getting any easier for the younger generation. Be glad you've got the option and make the most of it.
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Kent, WA
John Bailo's website
One of the lasting paradigms of the 80s mentality is this whole idea that young people are supposed to have stratospheric success. The typical movie post-Michael J. Fox is about a 21 year old, saving the world, winning a congressional medal of honor and marrying a victoria's secret angel all the while amassing billions of dollars. (cf. Transformers, et. al.)
I don't put those things down, but a lot of being young is just being young and out on your own with friends. That said, I think maybe people should go back to some middle ground between living in their mom's basement and having a $3000 a month urban loft condo ala Jeff Winger from Community. Maybe there are "dicier" neighborhoods that would offer you a reasonably priced pad that you could share with buddies for example. Or consider a 'burb or town where you could be a big fish in a small pond.
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Or move into an abandoned building in Detroit, plant potatoes and wait for the end.
John Bailo says
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zzyzzx says
Thats because they knew the chances of that happening were ZERO.