Updated on 03.07.16

Questions About USDA Loans, Roof Repairs, Disneyland, Wedding Gifts and More!

Trent Hamm

Reader Mailbag

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five-word summaries. Click on the number to jump straight down to the question.
1. USDA loan for second house
2. Disneyland advice
3. Life insurance policy loans
4. Emergency roof repair
5. Specific non-bank mortgage
6. Student loans and bad credit
7. Health insurance challenges
8. Home equity for stock investing
9. Why Remember the Milk?
10. Debt payoff and credit report
11. Using windfall for car purchase
12. Size of wedding gift

Over the next several months, it seems like my family will be attending a wedding practically every weekend. Many different friends and family members are tying the knot in coming months.

The first wedding on that schedule occurred just this past weekend. We attended a lovely wedding of one of my wife’s cousins and his new bride.

One of the things I’ve come to find interesting about weddings is the different choices that the bride and groom make for the ceremony and reception. This time, both the wedding and reception were held at a very nice winery, featuring a free wine bar and a bottle of wine with the bride and groom on the label for each wedding attendee.

The thing is, weddings are always a balancing act. The more you spend on the wedding and reception, the nicer it is going to be without a doubt. However, at the same time, the more you spend on the wedding and reception, the less money you have for your married life.

I’m of the viewpoint that I wish every married couple whose wedding I attend would have the cheapest wedding possible. I would far rather have the bride and groom start off on a wonderful life together with as much money in hand as possible.

At the same time, Sarah and I were once a bride and groom ourselves, and we remember what it was like having so many friends and family coming together to celebrate our union. We wanted the experience to be wonderful and hopefully memorable for every other attendee. At the same time, we didn’t really want to bankrupt ourselves, either.

In the end, it’s a balancing act.

This message goes out to brides and grooms everywhere. Most of the guests at your wedding are there to see you get married, not to appreciate a lot of flashy stuff at the reception. We’re there because we love and appreciate the two of you and want to see you launch your life together in a joyful fashion. Whether you have a glitzy reception or a barn dance, we’re still going to be happy to be there.

Because, in the end, the day is about you two, not about stuff, not about flashiness, not about glamour.

Q1: USDA loan for second house

I am a single mom looking to buy a house. I currently own a house with a family member but need to find other living arrangements so we can sell. Would I qualify for a USDA loan to buy a house for my daughter and me before we sell the other house? I found a house but have no money for a down payment.
– Nina

I assume that you’re referring to the USDA’s Single Family Housing Guaranteed Loan Program, which “assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Eligible applicants may build, rehabilitate, improve or relocate a dwelling in an eligible rural area. The program provides a 90% loan note guarantee to approved lenders in order to reduce the risk of extending 100% loans to eligible rural homebuyers.”

The first question is whether or not you’d qualify for the loan due to income eligibility. The income eligibility requirements are spelled out in this document. If you are, then it likely comes down to finding a lender that’s involved with this program and simply applying for it.

I would suspect that you would probably not qualify for a second loan without the kind of guarantee that this loan provides, but given that you are intending to sell the house as soon as you can, my guess is that you’ll be able to get this kind of guaranteed loan. However, you simply won’t know until you apply for it, so I’d give it a shot.

Q2: Disneyland advice

Hello! I am a college student writing a report on Disneyland prices and have come across your website looking for a breakdown on how the “average American family” SHOULD be spending their money. From there, I want to compare it to how that family could or could not budget to accommodate Disneyland Passport prices for their entire family. Do you have any suggestions or sources I could refer to? Thank you!
– Millie

I assume that Millie is referring to this article where I walked through how the average American spends their money. From that article:

“The average American household earns $63,784 before taxes, which amounts to bringing home $51,100. From that amount, they spend $9,004 on transportation, $6,602 on food (of which $2,625 is spent at restaurants and $3,977 is spent on food eaten at home), $5,528 on insurance and pensions, $1,604 on clothes, $2,482 on entertainment, $17,148 on housing, $3,631 on health care, $1,834 on cash contributions (donations and legally required spousal and child support), and $3,267 on other expenditures.”

Millie seems to want to compare this to a Disneyland Annual Passport, for which the entry level option is $599 per person per year. The average American household consists of 2.54 people according to the US census, so you’d want to round that to three such passes. That would add up to $1,797 per year.

So, could you find $1,797 in that annual budget? That’s less than the annual amount spent on entertainment in the average budget, so I’d suggest yes. The average cable bill is $100 per month, for instance, so just cutting cable alone pays for two of these passes. Cutting back on a couple meals per month of eating out could make up the rest of the money easily.

The real question is what kinds of tradeoffs would a person wanting this kind of Disney annual pass be willing to make? It certainly can be done, but you’d have to trade off some things.

Q3: Life insurance policy loans

What are good insurance companies to purchase life insurance from that provide policy loans?
– Lauren

Pretty much any company that offers cash-value whole, universal, or variable universal life policies will offer you the capacity to borrow against those policies. However, these policies generally won’t have any significant value to borrow against for years, as you can rarely borrow more than the value you’ve built up in the policy.

To put it simply, just opening a policy doesn’t give you the ability to start borrowing. You have to build up some value in that policy, which takes years, and then borrow against that value. Pretty much any insurance company allows this.

However, if you want to have the freedom of having life insurance on yourself or a loved one and also have more cash in hand right away, you’re better off getting a term life insurance policy. You’ll make much smaller payments for the value of the insurance, which will leave more cash in your pocket with which you can do other things (such as pay down other debts).

Q4: Emergency roof repair

I need help desperately. I am in need of a roof for my home, the City has given me less than 30 days. After that I am facing fines, prosecution, etc. I am married. My husband’s credit is about 645, while mine is 600. He makes about $45,000 annually I am on disability. I don’t know where to start, I am scared and intimidated since I have been turned down before. Any advice would be grealy appreciated.
– Karen

It looks to me like you are seeking to borrow money in order to repair the roof on your home because your current home roof is not up to city code.

My usual suggestion in situations like this is to start saving and doing much of the work yourself. Given your disability situation and the emergency nature of the work, that doesn’t seem like it will apply here. So, you’re going to have to look at financing.

Given that you seem to have lived in the home for a while, you may want to consider a home equity loan for this. If you’re using home equity, that generally means that you don’t have to have great credit in order to get the loan, as you’re putting up your home as collateral on the loan. If I were you, I’d check with a local credit union or two and see whether or not they would approve such a loan for a roof repair.

If you don’t have much equity in your home, meaning that you have a mortgage on which you still owe most of the value of your home, you might be eligible for a FHA Title 1 Property Improvement Loan, which is described here. If you’re turned down for a home equity loan, this is another route to consider which might be really good for your situation. You can call the FHA at (800) 767-7468 for more info on this program.

Q5: Specific non-bank mortgage

I just found an article you did on nonbank mortgages and we are in the process of obtaining a loan through Carrington Mortgage, but have been reading nothing but bad reviews on them and possible fraudulent activities. Have you heard anything on this nonbank that you can share with us before we close this month? Not worth taking a chance. Thank you so much!
– Irene

From what I’ve read, Carrington seems to be one of many lenders who operate just fine if you make your payments regularly, but can be difficult to work with in the event that everything doesn’t go smoothly. After reading through a large pile of their reviews, it seems to me that when people start falling behind on their mortgage, Carrington doesn’t work well with them, but for people who stay up to date, there’s rarely a problem.

Many of the negative reviews I’ve read tend to involve people who have fallen behind on their loans and have found Carrington difficult to work with when that happens. Often, the reviewers don’t directly state this, but it is clear in many of the stories if you pay attention to the details.

This isn’t altogether uncommon in the lending industry, especially if you go with “nonbank lenders.” The honest truth is that they’re designed to put minimal amount of effort into each customer in order to keep costs as low as possible, which means that when things are smooth and you don’t need customer service, they’re fine, but when things run into difficulty, they often don’t have adequate customer service personnel or policies to provide the help that many people expect.

Personally, I don’t find saving a small percentage on my home mortgage to be worth dealing with a financial institution that has difficult customer service when I actually need their help, but for some people who are confident in their ability to repay, the savings may be worth it.

Q6: Student loans and bad credit

I have a question about student loans if you are able to help. We need to take out loans for our daughter. We do not have a cosigner or most likely do not have a very good credit score. I am worried she will not be able to get student loans or enough to of them to college. Any guidance would be appreciated.
– Neal

Student loan companies are typically fairly flexible in situations like this. However, to obtain the loans, it is likely that your daughter will have to be the one taking out the loan with you as cosigner. In a nutshell, it will be her loan, not yours.

You can commit to helping her with the payments when she graduates if you so choose, of course. That’s a decision amongst the three of you.

Remember, though, that the most cost-effective way to get a four-year degree is to take care of the general education requirements at a community college instead of attending university the first two years, saving those years for the classes specifically required by the major. You’ll end up saving a ton of money doing things that way, plus it gives you a two-year window to improve your credit.

Q7: Health insurance challenges

I have a question about health insurance. I have Social Security but no green card yet. I signed up with [a specific health insurance provider], got insurance through them, but I am very disappointed in them. Their claims are not real. After my hospital visit I got stuck with many bills that were uncovered, even though they said they would be covered. I’ve tried to get them to mail me my benefits and I’ve been unsuccessful. They never respond or call back. I just found out that many claims have been filed against them. I would like to change them and get a better health insurance company but open enrollment is now closed and I am not sure if in November I can change this company due to the fact that I am not a resident yet. Any advice on how to change this company or what options would I have?
– Bianca

If what you say is true, your health insurance company may not be living up to the requirements that they’re under in the Affordable Care Act. This sounds really shady to me, anyway.

My suggestion to you would be to contact your state’s health insurance exchange directly and spend the time to talk through your situation with them in detail. This may take some time and will probably provide some documentation.

If you can show that they’re not living up to the requirements of the ACA, you may be granted an exception that will allow you to change providers immediately. That’s the path I would take.

Q8: Home equity for stock investing

Would it make sense to get cash out on a home refinance and invest in the stock market?

I got a 3.125% rate on my house and if I can get 7%-8% return in the stock market, it seems like that would be a win.

We just refinanced and took $30,000 out for a kitchen remodel but decided to hold off on that.

Am I missing something?
– Shawn

The problem here is that the stock market is really volatile, while your “investment” in your home mortgage is not only stable as a rock, but the “gains” are in the form of post-tax money while you’ll have to pay taxes on the stock gains.

For example, let’s say you bought into the S&P 500 on January 1, 2000. On that day, the value of that index was 1,425.59. What was the value nine years later? 865.58. Yep, over the course of nine years, the value dropped by about 40%.

Now, imagine if at that point you suddenly needed that money back. You withdraw out that money and you have only about 60% of your original value. It’s not going to help you solve your problem.

Of course, not every period is going to go down like that. Some periods will go up even more than 7%. There’s also the factor that the stocks will be paying out 2% (or so) of their value to you each year in the form of dividends.

The problem with stock investing is that the 7% annual return isn’t remotely steady. One year, it might be 15% or 20%. The next year might be a loss of 40%. It’s only over a lot of years that it begins to approach a 7% average annual return, and there are many years and multi-year periods where it is a loss.

Stock market investing does not make sense for the average investor unless they have a very long term goal and they intend to stick with that goal. If you’re just investing to hope to “make more money” over the next few years, this is a disastrously bad idea.

Q9: Why Remember the Milk?

Trent, why are you transitioning from “Todoist” back to “Remember the Milk” as your task tracker of choice? What are the features in “Remember the Milk” that you value and don’t have in “Todoist”?
– Stephen

I have been a Remember the Milk user for many, many years. Aside from a handful of features, it was pretty much the perfect task manager for me. The biggest feature I’ve always wanted them to have was subtasks, which basically means I could add a task to my to-do list and then add “steps” to that task that I could check off one at a time, but it never had that feature.

Eventually, I found Todoist, which had that subtask feature, but it was missing lots of little things I had become used to in Remember the Milk. With RtM, I knew all of the keyboard shortcuts; with Todoist, I had to start over and slowly relearn them.

When Remember the Milk added subtasks in their recent revision, I took a long look at the two programs and decided that my familiarity with Remember the Milk and slight preference for how it was organized was worth switching back, at least for me.

At this point, RtM is very close to my “perfect” task management tool. I know the keyboard shortcuts. It does exactly what I want it to do. Part of this, of course, is aided by many years of familiarity.

I’d encourage people wanting to try out a task management tool to try them both. They’re both excellent tools. RtM just fits my personal idiosyncrasies better.

Q10: Debt payoff and credit report

If I have a past debt and I go pay it off and they offer me a lower amount just so I will pay it off, will that still be as paid off on my credit report or will it report something else and not look good on my credit report (like a charge off or partial payment)?
– Emily

It depends on whether you pay it off in full or not. If you negotiate a partial payment, it will appear like that on your credit report.

Having said that, a partial payment along with an indication that the account is settled is far better on your credit report than an open unpaid account. Your credit score will rebound nicely, though it might not reach a really high number for a while.

The best way to avoid the “partial payment” ding is to pay off the debt in full, but a negotiated settlement might be a better overall result for your financial situation.

Q11: Using windfall for car purchase

My father recently passed away and I will be getting his life insurance and pension. I really want to get myself a new or newer vehicle. I was wondering would it be better to outright purchase it or if it’s possible to finance should I take that route making a big down payment and use the left over money that I would have used to purchased the vehicle with outright to make the payments?
– Vincent

For starters, do not buy a brand-new vehicle. That’s one of the worst financial moves you can make. Driving a new car off the parking lot means an immediate loss in value of thousands of dollars because you’re simply never going to be able to resell it for its new value.

A much better approach is to shop around for late-model used cars. These are typically cars that have come off of a lease or are cars traded in by someone who is in a frantic upgrade cycle on their cars (and throwing many thousands of dollars a year down the tubes).

Your best approach, if you have the cash, is to just pay for it in full. The only exception to that is if you have never had any debt at all and haven’t established any sort of credit history. If you have a credit card in your wallet or a student loan that’s helping you build a good credit profile, you’re better off just paying this car off in full if you have the means.

Q12: Size of wedding gift

My son’s future in-laws are giving them $15,000 towards their wedding. Does that indicate how much we should give as a gift? We had come up with an initial figure of $5,000 before we knew their amount. Only child. We earn in the low to mid $100,000’s.
– Ana

Do not worry in the least about what your son’s future in-laws are giving them as a gift. That should not be part of your consideration at all in terms of a gift. You do not know the financial situation of your in-laws or what their reasoning might be or what their arrangements with their daughter might be. You also have no reason to try to “keep up” with them.

Give your child the gift you were planning on giving them. That gift was truly from the heart and doesn’t put you or your child in an uncomfortable situation.

It’s worth noting that I can’t even imagine having received that large of a gift upon getting married. That is far more than I personally would have expected to receive from anyone.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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