advice for first time home buyer? - Page 2

BG1124 · #11 10-09-2007, 02:48 PM

[ QUOTE ]
BTW the student loan is a stafford federal loan with a 3.75% interest rate if that makes a difference. Obviously debt is debt, but I've heard certian debt like federal student loans are looked at differently.

[/ QUOTE ]

Yes this does make a difference. A loan officer would likely give you a lot more slack when it comes to debt from a Stafford loan as compared to an auto loan or credit card debt. Talk to your officer/broker and ask for how your rates would vary going each route.

krishan · #12 10-09-2007, 03:06 PM

[ QUOTE ]
[ QUOTE ]
BTW the student loan is a stafford federal loan with a 3.75% interest rate if that makes a difference. Obviously debt is debt, but I've heard certian debt like federal student loans are looked at differently.

[/ QUOTE ]

Yes this does make a difference. A loan officer would likely give you a lot more slack when it comes to debt from a Stafford loan as compared to an auto loan or credit card debt. Talk to your officer/broker and ask for how your rates would vary going each route.

[/ QUOTE ]

Plus the interest is tax deductible.

Krishan

spex x · #13 10-09-2007, 03:32 PM

First, have you run your credit report? Having a bank account and student loans is a credit history, so don't sell yourself short.

Second, a $15k loan at 3.75 stretched over 20 years is having very very little impact on your monthly debt-to-income ratio, so it DOESN'T MATTER. As for debt, the bank doesn't so much care how much you have in terms of dollars, they only care how much that debt is costing you each month (i.e., if you've got $2 million in debt, thats fine as long as your income is sufficiently high to support all that debt).

Ok, so say you can save up $15,000 in one year. The question is whether its better for you to spend $15k on our student loans or spend $15k on a down payment. The bank will BY FAR prefer you to put that money into the down payment. Down payments are absolutely greater protection for the bank whereas lower debt-to-income ratio only implies greater protection - it demonstrate a better ability to pay, but the bank still has to rely on you to actually make those payments. When you put the money down as a down payment, the bank is more protected in the case that you default and they have to foreclose and resell the property, becaue their basis is lower.

Third, student debt is considered 'good' debt by banks. They look at it kinda like an investment that is paying monthly dividends (higher salary). So don't worry about it. Now if it were credit card debt or car loans or something, that'd be different. But student debt is ok as long as you have a healthy DTI.

cantsitstillbr · #14 10-09-2007, 03:42 PM

[ QUOTE ]
First, have you run your credit report? Having a bank account and student loans is a credit history, so don't sell yourself short.

[/ QUOTE ]

The student loan is not in my name. It's my wifes. I have never had a loan or a credit card.

maxtower · #15 10-09-2007, 03:56 PM

If you plan to be in the house for 7+ years and your monthly payment is not much more than renting, you might as well buy a house. You'll end up saving quite a bit in taxes.

Go to dinkytown.net. You can input all the variables in a rent vs. buy calculator there. Play around with some of the numbers and get a feel for how different scenarios change things. If you are comfortable after that, it sounds like buying a house could be right for you in this situation.

The main things to be concerned about will be time in the house and the difference between your mortgage payment and your current rent. There are a lot of fees associated with buying a house and you'll need several years for appreciation to make that back up.

prohornblower · #16 10-09-2007, 04:18 PM

[ QUOTE ]
zero debt besides that student loan.

[/ QUOTE ]

Good answer. What about all the other stuff I wrote?

cantsitstillbr · #17 10-09-2007, 04:31 PM

[ QUOTE ]
You're so young, and you aren't planning on having kids for 7 years. Why need a big house?

And why do you need a 2 bedroom apartment? 1 bedroom is enough, no? I'm guessing you live in a 2 br apartment because you feel cluttered based on your "hate renting" comment.

I don't know man, owning a home is a big responsibility. It's kind of nice when you live in an apartment and the water heater/washer/dryer/dishwasher/refrigerator/stove/microwave/toilet breaks and you can just call the maintenance dude to fix it.

Owning a home comes with a lot more hassle and stress and mowing a yard. lol.

[/ QUOTE ]

"I'm guessing you live in a 2 br apartment because you feel cluttered based on your "hate renting" comment. "

Pretty much nailed it on the head. But is that bad? I would think "hating renting, wanting more space" is a pretty common reason to buy a house.

I dont consider a 1200-1600 sq/ft house, $110000-$140000 a big house. Infact I sort of figured people would be calling me a nit given our current wages. I feel I'm being on the very conservative side looking at houses in this range.

As far as all the hidden costs of owning a house per fixing things ect... I guess I could be underestimating things there, but again thats why I'm looking in this particular price range-So we dont get over our head in our first house. Also, I am very handy. I've literally never taken my car to a shop. Anything reletivly minor I can fix myslef. I figure it will be similar with most things at home.

RedBean · #18 10-09-2007, 04:39 PM

Don't sell yourself short....buy a house in the 200k-220k range, and although those mortgage payments may seem a bit steep at first, in 5-6 years with inflation and your yearly increase in salary.... it'll be like candy.

prohornblower · #19 10-09-2007, 04:40 PM

I think the most common reasons people buy a home is because they have kids. Y'all are a long way from that.
And I find it surprising you can only get 1200-1600 sq. feet in Huntsville for $140K.

If you're a nit then I'm a huge nit, I'll be looking to buy in 12-18 months and will likely buy for 150-160K in Houston (and should be able to get 2000s.f.) on household of ~95K with already a lot saved up and a lot in Roth's and 401(k)'s. I'm really really conservative though.

My current rent is around what yours is. I'm just wondering if saving for a couple years would give you more options. I wouldn't just move into a home because you feel like it's the next step. You can save $50K in 2 years.

How are your retirement accounts?

jively · #20 10-09-2007, 05:11 PM

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