My daughter and I had yet another text discussion about finances. I am her go-to sounding board for budgets and financial matters, which is actually a pretty nice place for me to be. This latest question was about a home purchase with less than 20% downpayment saved. While C has wanted to buy a home for a really long time, she’s evaluating her options right now and contemplating the reality of real estate in our slice of northern California. There are a lot more expensive areas (hello Bay Area shoppers!) yet even around here a fixer in decent area is going to start at $150K, which translates into a $30K savings for that elusive 20% downpayment.

Her question related to PMI, though. She now feels that waiting a few more years and saving, Saving, SAVING is a better than buying with less than 20% down and paying PMI, but here fiance disagrees. I did some quick research to ensure I was correct, but it appears that an FHA mortgage now requires PMI for the life of the loan, rather than a minimum of 5 years and 78% loan to value, which would definitely put me off of the idea of buying with less than 20% down payment. As I tried to explain to her, it is a gamble. Should they pursue this path the home they choose could increase in value and they could refinance once they reached 20% equity. However, what if their home does not appreciate that quickly and interest rates outpace the increase in value? In that situation it does not seem prudent to refinance into a higher rate to get out of the PMI, and she certainly agrees with my logic. However, she and A have grown up around low interest rates and it is hard for them to imagine them rising very quickly. Housing is also starting to rebound around here and it has been very much a sellers market the last 18 months or so, although it does seem to be leveling out, and they have some anxiety about being priced out of the market. Being more conservative financially, I support her leaning toward waiting a few years and saving more money. A is more willing to take a chance and it has become a point of discussion between the two of them. 

I point out to her that M and I bought our first (and probably only) home just 2.5 years ago, at ages 50 and 54. Even if they waited 6 years (just an example for nice round numbers), they would only be 35, their vehicles would be paid off, A will have made inroads on his student loans (they have no other debt), and most importantly, they will have more time to save more for a downpayment and to have some money for new house goodies. She sees the logic and understands the numbers, but A is still in the “debt is normal” mindset and not quite there yet. 

But that’s not really what is making me feel cheap this morning. 

We have told C that we will contribute $5000 toward their wedding. Now, if they do not want our assistance with the wedding expenses or if they decide to do a simple courthouse ceremony, the $5000 can be used as a downpayment on their first home. I am striving for balance here, between being a controlling mother of the bride and just handing them a check to blow on whatever they wish. But the reaction from another close friend makes me wonder if $5000 is not much of a wedding contribution? Her daughter’s wedding was $30,000, of which they paid 50%. It was a beautiful ceremony and reception, but privately I thought that was a lot and way over the top. I have always had the $5000 figure in mind for both my kids. However, I admit to being very practical and HOPING they would both opt for simple weddings and receptions that stay in the low 4 figures range. I also do not feel at all guilty for the string of wedding expenses or down payment. If I had to approve the house or the wedding plans I would be THAT mom, but since I am leaving details to them I think I am being okay. 

Only now I second guess myself. Should it be more? I recognize that a lot of families cannot afford to help their kids with college, much less wedding or home downpayments, so I guess like the rest of personal finance this is a personal choice. Now that I have typed it out in this post, I recognize the amount is what M and I are comfortable contributing, me probably moreso than M, because he is naturally more protective of both kids and concerned about their choices in mates. 

7 thoughts on “My daughter’s apron strings

  1. After all is said and done Hubs and I will have shelled out $200K between all the kids for their college.
    Stick a fork in me, I am done. Gee that’s the second time I’ve said that

    The rest is on them, including wedding expenses and house purchase(one used part of their college funds for a house purchase but got no other $ gift from us for it’s purchase).
    We will consider loaning them money for said large purchases if they have been 1, otherwise financial responsible and 2, will pay it back.
    Lie and don’t pay it back and if there is an estate when we pass it gets deducted from your piece.

    My wedding was a very low cost affair and neither sets of parents gifted us money to buy our first home(I am quite proud of the fact that we paid for it ourselves).

    If I lived in CA I wouldn’t buy a house, period. I’d rent, find another accommodation(live in help, find someone who needs a house sitter longterm) or move out of state. It’s just nuts on many levels there….house cost, taxes, etc.
    I can’t imagine tying up assets that high in value in a house and then worrying every night whether I’d be able to sell it and not lose my shirt in the deal if the market takes a nosedive again….or it come crumbling down in a quake.
    I’d only consider home ownership there if I could get a fixer and I knew how to swing a hammer, etc.
    There is a lot to be said for sweat equity. 😎

    IMHO Kids get too much money help these days and it usually comes at the expense of their parents’ financial well being. Parents just can’t say no to their kids. Kids are too comfortable taking hand outs from the folks well into their 30’s.

    It all comes down to what you can afford and how much you are comfortable with giving them I guess.

    $5K today buys very little in the wedding industry and I’ve never seen the point of spending heaps of cash on one day in your life. I’d probably take the $ and invest it in something long term for them instead.

    1. The massive correction California went through in housing prices was a painful and expensive lesson for a lot of people, and I cannot disagree with you on the taxes and politics out here. That said, we do not live in earthquate country and have no snow or ice to contend with in winter. Like everything, it’s a trade-off.

  2. Weddings are way too expensive now a days. My parents are only giving us $1500.
    As for the house buying, instead of an FHA, she could do a conventional loan (if she has good credit) with only 5% or 10% downpayment and then only pay PMI until equity is at 20%. If they aggressively paid it down they could get rid of PMI quicker. Also, PMI for a conventional loan is like .5% comparied to PMI for FHA which is over 1%.

    1. I’m honestly not sure of their credit standing, but I think it’s pretty good. Up until now she has been the one really wanting to buy a home, only now that she’s getting into the nitty-gritty of the process she’s seeing the downsides of it. Her mind says “I’m going to be 29!” and her checkbook sense says “wait! Let’s build some more reserves so I can have cash to do stuff in the new house.”

      Totally agree on the cost of weddings! My daughter wants simple and small, but we’re a tiny family and accustomed to potluck type celebrations. Her fiance’s family is HUGE and has expectations of a larger celebration party.

  3. Don’t compare what you want to give your kids towards their wedding to what someone else has. Like you said, it’s all a personal decision, based on your finances and family dynamics. $5000 seems reasonable to me, but I’m sure it wouldn’t be to most people out there (who live debt-ridden lives). I remember back in the 80’s friends of my parents spent like $20k on their daughter’s elaborate wedding. She was divorced in less than a year. My parents oped us the money or the wedding too…….looking back wish I would have taken the money (though it wasn’t really that much. We didn’t have too fancy of a wedding at all).

    Your daughter wants small and simple. What does fiance want? It should be what they want, not what his family wants/expects.

    1. Fiance just wants to get married and have a celebratory party, but that tends to grow and become expensive when you start adding food and alcohol. I am sure they will work it out between themselves. At almost 29, they both feel like the wedding and its expenses are their burden, not their parents. I have always felt we would contribute something to their new life together, and right now I am hoping they will reserve the funds for a downpayment on their first home. That’s my preference, but I’m leaving that choice up to the two of them.

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