advice for first time home buyer?

[jively]

I agree with the later posters: you do not have to pay off the student loan. As long as your payments are on time, it should not negatively effect your credit.

I would suggest you keep saving $2,000 per month, and try to build that up so that you can put 20% down on your house. 20% of a $125,000 house requires $25,000 down, which is only 12 1/2 months of savings. If you are able to put down 20%, you will not have to pay PMI (private mortgage insurance).

Keeping another $10,000 for emergencies is probably a good idea as well. (There are a lot of other expenses in moving and furnishing a new house.)

If you buy a $125,000 home and put down $25,000, your mortgage balance is $100,000. If you get a 30-year at 6.25%, your P&I payment is only $615 per month. You should easily qualify for this on a $42,000 salary. (Adding your wife's salary will help even more.)

Even if your payments on the student loan are $100 per month, these amounts are low based on your salary. If you allocate 28% or less of your gross monthly income to housing (P&I, taxes, insurance), the house will be very affordable. 28% of gross monthly on $42,000 is $980 per month.

You should check your own credit reports and credit scores. You can also talk to a lender, and maybe get pre-approved at some point.

-Tom