• Should they continue to rent? Use the HUD rental expenses guideline to guide your answer.
• If they were to purchase the home Tammy found, how much of down payment will they need to have in order to avoid PMI? How much will they need to put down if they use a 5% down payment?
• Given their current financial situation, do they have sufficient assets to make either down payment? If they do not have enough, what can they do?
• What will be their monthly costs (payment, taxes, insurance) on a loan with either down payment?
• What tools can you use to determine if FHA would consider them candidates for homeownership? What do these tools say about them?
• Based on your estimates, do you agree or disagree with Tammy that they should purchase a home now or in the future?

• Broader questions to consider:

• Should Ron and Tammy request a non-standard student loan repayment plan? Why or why not?
• How might delaying the decision help or hurt their circumstances?
• What actions can they take to improve their circumstances?
• o put down if they use a 5% down payment?

a Ron Lamar and Tammy Lamar are in their thirties and have been married for 15 years. They got married right after Ron graduated from college. They have come to you seeking help in planning their financial future. They are both employed in stable jobs. Tammy has practiced as a dental hygienist since graduating from the dental hygiene program at Pawnee School of Dentistry in 2012. She is employed by a very well-regarded practice and really enjoys her work and flexible schedule that it affords. Ron has been a woodworker for a regional furniture company for the last 8 years. Because of his job, Ron is seldom home. In 2014, the family moved to Lynchburg, VA to be closer to Tammy's sister, Sarah, so she could help care of the children two days a week. They didn't know then if they would be able to stay in Lynchburg so they decided to rent a townhome. Tammy is particularly interested in buying a home, she really wants to buy a single family home for the two kids to run, play, and practice baseball. Ron, on the other hand, likes the flexibility of renting. Tammy has been investigating the housing market but has never owned a home before, and so is unsure about all of the other considerations. She found a wonderful new house priced at $205,000. Given their credit score, she believes that she and Ron can, at best, qualify for a 30-year fixed-rate 5.20% mortgage. Their credit scores could be improved, particularly Ron's. Given Ron's bad credit history he has learned to be wary of debt and would prefer a 15-year mortgage and large down payment. a Ron After making a few calls she determines that a homeowner's insurance policy will cost $1,400 per year and property taxes will be $4,300 per year. She also knows the lender will require her to make the usual 20% down payment to avoid private mortgage insurance (PMI) but will accept a down payment as low as 5%. PMI costs $900 per year. The family is currently carrying a high credit card balance relative to the card's credit line. They are making the minimum monthly payment of $200, but recognize that the 16.9% annual interest rate is adversely affecting them. They are considering accelerating paying off their debt over the next four years. Finally, they are making student loan payments according to the standard repayment plan. Income and Expense Statement of the Lamar Household Net Worth Position for the Lamar Household Ron Joint TOTAL Joint Total Income $44,000 $49,000 $93,000 Checking $250 $250 Interest $23 $23 Savings $2,300 $2,300 INCOME $93,023 Car 1 $13,000 $13,000 Taxes $9,966 $11,099 $21,065 Car 2 $9.000 $9,000 Rent $32,550 $32,550 Furnishings $3,500 $3,500 Auto Insurance $2,800 $2,800 Clothes $2,400 $3,300 $5,700 Food and eating out $5,000 $5,000 Other household $5,000 $5,000 $4,634 $4,804 $9.438 Car payments Sports equipment $2,300 $2,300 $1.000 Student loans $4,869 $3,060 Hobby supplies $7.929 $1,000 Hobbies $23,000 $1,200 $1,200 401(k) $23,000 403(b) $42.000 $900 $42.000 Sports $900 ASSETS Retirement $1,760 $2.940 $107,050 $4,700 Credit cards $13,000 $13,000 Vacations $4,900 $4.900 Student loans $7,400 $18,000 $25,400 Credit cards $2,400 $2,400 Car loans $3,000 $12,000 $15,000 EXPENSES $92,882 LIABILITIES $53,400 a Ron Lamar and Tammy Lamar are in their thirties and have been married for 15 years. They got married right after Ron graduated from college. They have come to you seeking help in planning their financial future. They are both employed in stable jobs. Tammy has practiced as a dental hygienist since graduating from the dental hygiene program at Pawnee School of Dentistry in 2012. She is employed by a very well-regarded practice and really enjoys her work and flexible schedule that it affords. Ron has been a woodworker for a regional furniture company for the last 8 years. Because of his job, Ron is seldom home. In 2014, the family moved to Lynchburg, VA to be closer to Tammy's sister, Sarah, so she could help care of the children two days a week. They didn't know then if they would be able to stay in Lynchburg so they decided to rent a townhome. Tammy is particularly interested in buying a home, she really wants to buy a single family home for the two kids to run, play, and practice baseball. Ron, on the other hand, likes the flexibility of renting. Tammy has been investigating the housing market but has never owned a home before, and so is unsure about all of the other considerations. She found a wonderful new house priced at $205,000. Given their credit score, she believes that she and Ron can, at best, qualify for a 30-year fixed-rate 5.20% mortgage. Their credit scores could be improved, particularly Ron's. Given Ron's bad credit history he has learned to be wary of debt and would prefer a 15-year mortgage and large down payment. a Ron After making a few calls she determines that a homeowner's insurance policy will cost $1,400 per year and property taxes will be $4,300 per year. She also knows the lender will require her to make the usual 20% down payment to avoid private mortgage insurance (PMI) but will accept a down payment as low as 5%. PMI costs $900 per year. The family is currently carrying a high credit card balance relative to the card's credit line. They are making the minimum monthly payment of $200, but recognize that the 16.9% annual interest rate is adversely affecting them. They are considering accelerating paying off their debt over the next four years. Finally, they are making student loan payments according to the standard repayment plan. Income and Expense Statement of the Lamar Household Net Worth Position for the Lamar Household Ron Joint TOTAL Joint Total Income $44,000 $49,000 $93,000 Checking $250 $250 Interest $23 $23 Savings $2,300 $2,300 INCOME $93,023 Car 1 $13,000 $13,000 Taxes $9,966 $11,099 $21,065 Car 2 $9.000 $9,000 Rent $32,550 $32,550 Furnishings $3,500 $3,500 Auto Insurance $2,800 $2,800 Clothes $2,400 $3,300 $5,700 Food and eating out $5,000 $5,000 Other household $5,000 $5,000 $4,634 $4,804 $9.438 Car payments Sports equipment $2,300 $2,300 $1.000 Student loans $4,869 $3,060 Hobby supplies $7.929 $1,000 Hobbies $23,000 $1,200 $1,200 401(k) $23,000 403(b) $42.000 $900 $42.000 Sports $900 ASSETS Retirement $1,760 $2.940 $107,050 $4,700 Credit cards $13,000 $13,000 Vacations $4,900 $4.900 Student loans $7,400 $18,000 $25,400 Credit cards $2,400 $2,400 Car loans $3,000 $12,000 $15,000 EXPENSES $92,882 LIABILITIES $53,400