Financial advisers?

ChanceTheRapids · #1 12/04/12, 05:56 PM

Well, the wife does not fully trust my accounting skills to see if we're "ready" to buy a property. She has lots of concerns, which I get. So, she suggested we talk to a pro - a financial adviser - to see what their opinion is.

Has anyone ever used one for something like that? I assume they would just go over the price of the property, interest rate, property taxes, utilities, etc. and then compare with our current budget, make sure we're not missing anything, and then check to see if it is possible.

Another thing I thought of, is, when we bought our current house, we provided much of the same information to the lending agent, who decided we were qualified to purchase a house at $XXX. My personal opinion is that they aren't very thorough, but maybe that was just the way this one lending agent was.

Thanks for any advice.

mnn2501 · #2 12/04/12, 05:59 PM

Your loan company will do this as part of qualifying you for the mortgage.

Gianni · #3 12/04/12, 06:05 PM

The finiancial advisors I am familiar with manaage your investments. For the annual fee they may be able to advise you if you are financially able to purchase a property or any other item. A Mortage lender will tell you if you have the money but not if that is where you should best spend it or what things you should get out of to afford it.

emdeengee · #4 12/04/12, 06:08 PM

You may still want to consult a financial advisor but this could be some interesting information. When you go to this web site click on "Articles" at the top and when you get to that page there is a section at the bottom called "Home Sweet Home". It is very easy to read these articles and they contain a ton of common sense information about buying a house or property. There is also a section on the home page "Resources" that has a lot of inteactive budgeting sheets. All the information is free. Following this financial advisors advice got us out of debt, back to university and into our dream property.

Gail Vaz-Oxlade|Debt-Free Forever|Money|Book|Budgets & Personal Finances

PerhamMN · #5 12/04/12, 07:38 PM

I'd take a look at some of Dave Ramsey's stuff. His website should have some good advice, and cheaper than any financial advisor!
Real Debt Help - Get out of debt with Dave Ramsey's Total Money Makeover Plan - daveramsey.com

TnAndy · #6 12/04/12, 07:44 PM

Most 'financial advisers' are salesmen trying to sell you whatever makes them the most money with very little regard for your situation.

If they were REALLY any good, they would have made enough money of their own, on their own, and wouldn't need your business.

TheMartianChick · #7 12/04/12, 08:07 PM

My experience with banks & mortgage companies has taught me that they usually tell you that you can afford a lot more house than you should actually buy.

The last one that we talked to was in Florida. He told us that we could afford a house that was in excess of $300,000 and then explained how we could cobble the financing together with a couple of diffferent loan products. Having three loans on one house just didn't make sense to us and if we'd gone that route, we'd have been in a world of hurt right now!

Before you talk to a professional, you and your spouse should be talking to eachother about how much you want to spend and what you feel comfortable with. Talking to a professional is the step that you take when you are both on the same page.

Keep in mind that most financial advisors are not homesteaders and cannot imagine living with the relatively low levels of debt that the lifestyle espouses.

chewie · #8 12/04/12, 08:14 PM

I don't know how you are with your bank, but at mine, the manager has helped me with some questions. I am not good at that stuff at all, but I took my questions to him and his fingers flew over the adding machine, he asked a few questions I didn't even think of, and came up with the best plan for us. took him less than 20 minutes, and was totally free.

Awnry Abe · #9 12/04/12, 08:16 PM

Most (actually all) financial advisors I have dealt with make their living either per transaction or as a percentage of the amount of wealth they manage. I think what you really need to do is seek wise counsel, in whatever form you can find. You have the ability to make the right choice, you just need to make sure you haven't missed anything.

I would NOT use mortgage qualification as a tool for making this decision. When a lien holder qualifies you, they have their risk and interest in mind, not yours. They get to consider the fact that they hold the property if you default, which has no benefit for you. They are considering you're ability to pay *plus* their ability to move the property. Hence, they can play with a little less risk.

(Obligatory disclaimer: I am not a qualified financial advisor, nor a banker, so I really don't know a darn thing about what I am talking about. But it sure sounds good.)

Jokarva · #10 12/04/12, 08:54 PM

Our tax guy is our financial adviser....we pay his exorbitant rate to do our taxes then we get free advice thru the year. He doesn't try to sell us anything though....I would hesitate to use anyone who worked off commissions. I hate dealing with financial stuff and don't want to always be second guessing someone's motives.

If you just want to see if you can afford a property the loan company will do that, but if you want to see your big financial picture (including a property), then a fee-only adviser may be a good idea.

Micheal · #11 12/05/12, 04:35 AM

Humm, don't know if'n a "financial planner" would do a real estate assessment per-say? I'd think more of going to a bank or the place you plan on borrowing the money from would give you a better answer; specially since they have "really" tightened up their lending practices......
Before I retired I went to a "fee-only" financial planner every 3-4 years just to make sure my over-all line of thinking/investing were on track to meet my very vage l-o-n-g term goals...... Advantage of "fee-only" - he/she gives usable (mostly generic) advice without trying to sell you anything as they get paid whether you take their advice or not...

wes917 · #12 12/05/12, 05:29 AM

As hads been stated, "financial advisors" are salesmen. The good ones get paid by percentage of gains, meaning if you dont make money neither do they. The person to consult for this type of question is your accountant, or someone well versed in budgeting, like a freind who works as a higher level manager somerwhere and does departmental budgets for a company.

geo in mi · #13 12/05/12, 07:06 AM

A bank's way of qualifying you for a particular house, and prequalifying you for a loan amount is different. You should choose prequalifying for a loan to see what is the maximum mortgage you can get, then go from there. BUT, just because you can get a big enough mortgage for something may strap you in other areas where you don't want to be strapped. Bank policies will vary, and it depends on their own lending rules at the time--availability of funds, length of loan, down payment policies, your employment length of service, if you will buy loan insurance, etc, etc. The bank won't really care if you eat beans every night to pay their loan to you, just as long as you pay up.

The long-standing rule of thumb has been: no more than 25% of your pre-tax income for your housing costs, no more than 35% total debt, including the mortgage in question.....leaving the rest for you---to pay taxes, gasoline, school clothes, medical insurance or bills, heat, Christmas presents, and oh yes, food.....(and traditionally, a down payment has been required to keep those percentages true)

That rule has been bent and broken so many times in the past--especially recently, as we all have seen with the "housing bubble". But it's not the rule that gets broken--it's actually the people who get broken by deciding not to follow it........

All you have to really know is if the property in question falls within the 25/35rule.

geo

BlueberryChick · #14 12/05/12, 08:06 AM

My husband is a financial advisor and I always cringe when people paint them all with the same "they're all crooks, out to get your money" brush. I've met a LOT of financial advisors over the years and there's no doubt that some of them put their own financial well-being ahead of that of their clients. But I promise that they aren't all like that!

(And a small handful DO understand the homestead mentality!)

Now that I've defended DH's honor

I would say that geo in mi has good advice. The 25-35% rule will give you a good idea of the debt you could handle. In my case, I've never been comfortable with a house payment/debt that is more than 25% of take home, not gross, pay.

Also, while financial advisors, accountants and mortgage lenders can all be helpful, it's up to you to decide what you can/should afford. They will never know you better than you know yourself. The suggestion to read up on Dave Ramsey is great.

agmantoo · #15 12/05/12, 08:10 AM

I view financial managers the same way as I view the calls coming in wanting me to invest in the foreign exchange market or that of precious metals. If these folks were so skilled why haven't they invested and gotten themselves financially independent instead of annoying me trying to sell me something I do not want?
The most qulified person to make your financial decisions is YOU! You know your goals, your risks, you willingness to make sacrifices, your willingness to go the extra mile for what you want to achieve. I remember when I wanted to borrow enough money to buy a washer and dryer and was turned down. Did I change my mind? Absolutely not. Instead I went to another lender and got the money and made the purchase. I worked overtime and paid the loan back in a matter of a couple of months. The man that turned me down had no idea of how determined I was. The same thing when I made my first land purchase. The land I could buy at the time on my budget had been on the market for ages. It was rough! There was no one interested in the property and no banker would make the loan. I found out that the owner was going into bankruptcy and which bank the loan was with. I talked to the owner and made him an offerer to take on his loan. I went to his banker and inquired about my taking over the loan. Long story short, 3 years later I owned my first 30 acres. If you are committed to having a start you can accomplish the purchase of the land. Only you know what YOU are capable of doing.

meanwhile · #16 12/05/12, 08:45 AM

Yes - I second the recommendation to look online for good honest free information. Dave Ramsey or any of the other top advisers will be good.

We went to two different "financial advisers" years ago. It was totally wasted money. They just told us what they wanted in order to try and get us to invest money with them and pay them fees. Once we did make the mistake of setting up an account with one of them but later learned they were taking a huge cut of the money up front. We were able to cancel the account but lost money doing it.

Ask questions, be sensible, talk to older adults who have been successful and are honest, consult with family members who are honest and successful and just use plain ole common sense.

Good luck!

rambler · #17 12/05/12, 09:03 AM

I have a good farm CPA that does my taxes, meet with him once a year and I would trust his advice on this question, would cost about $300 to get a review with him.

We do some bit of investing with a low-key money investor guy, we walk in when we have something to discuss, he calls if something we have invested is changing or needs attention, otherwise get a Christmas greeting and summer picnic letter from him, he's never tried to get more money from us nor has he ever pestered us in any way. Obviously, we let him handle more and more of our retirement goals.... Anyhow I would trust talking this over with him, not sure if or what he would charge us.

I would not talk to a bank loan officer or some random financial services person listed in the phone book. The loan officers job is to secure loans, they will generally encourage you to get deeper in debt that you really should, and the financial genius generally wants to gain by having you as a customer and will tell you what you want to hear rather than what is reality. If you are happy with his numbers, you will be a customer of his.

Your question and your goal of an independent review is a good one! The trouble is finding such a thing.

I would not blindly call someone, perhaps I'm too cynical?

Paul

Gianni · #18 12/05/12, 10:05 AM

I pay a flat fee to my financial advisor. She has been able to manage my portfolio in ways that i could never have done and spends many hours viewing trends and markets that I do not have the time to follow. She also has advised me on work 401K and what I need to do to best meet my goals. A good one will never contact you to drum up business unless you have contacted them first.

irondale · #19 12/05/12, 12:53 PM

Ok, there is more than one type of financial advisor out there. There are the ones that work for investment companies that get paid via transactions. Then there are independent advisors that work off of a flat fee or hourly rate. The independent advisors are the ones you want to look for, and they will help you manage your financial health.

Steve in PA · #20 12/05/12, 03:58 PM

For mortgages it's pretty easy. Think of these numbers as a Max and don't go to the bloody edge...

.26x gross income > mortgage payment + taxes + insurance
.33 x gross income > total debt service.

So, if your gross income from all sources is 48,000 your monthly income is 4,000

4000 x .26 = 1040. Your mortgage + insurance + taxes have to less than that
4000 x .33 = 1320. Your total monthly debt payments have to be less than that too.

I think that's what you are after