House / Debt / Dave Ramsey question

[disneysteve]

Originally Posted by Broken Arrow

it really depends on what your numbers look like and whether lenders think you can afford it or not.

One easy way to find out is to go to your local bank or credit union, and ask them if such a loan would be feasible.

BTW, I had to comment on this, BA. I think asking a lender if you can afford something is a bad idea. As we've seen with the whole housing mess, lenders will lend you the most they possibly can whether you can afford it or not. That's gotten better recently, but I still read stories of people today getting loans they really shouldn't be getting.

The way to figure out what you can afford is by having a detailed budget and spending plan and running the numbers yourself to see if you can afford it. Then you can go and find out if you would qualify for the loan you've determined you can afford.

[rooskers]

Originally Posted by disneysteve

The way to figure out what you can afford is by having a detailed budget and spending plan and running the numbers yourself to see if you can afford it. Then you can go and find out if you would qualify for the loan you've determined you can afford.

I would take it a step further. Do exactly that but then actually try to live by those numbers for at least 3-6 months and put the money in a savings account. Sometimes things look good on paper but for some reason or another you can't work it out in real life.

[creditcardfree]

Good advice, rooskers.

[mpweaver4]

thx for the advice. My student loan is one private loan. My interest rate is 2.5% + 3-mo. LIBOR rate. Not having a fixed rate is very unsettling, another reason why I feel like i need to do everything i possibly can to make big payments on it when I can.

[maat55]

There is no need to be in a hurry. Jim and Steve have laid out good advice for you to go by. The rent you are paying now is much less than the interest, insurance and upkeep you will pay on a house, so don't think you are missing the boat. Be patient and do this right.

[mpweaver4]

Good points, and I have had that feeling like now is the time to buy and i need to take advantage. But I've heard some great advice on here from these guys. The feedback is really appreciated.

[rizzmo]

My wife and I just purchased a home for 132k. We paid the 20% down and are still left with a 10k EF. Additionally we have no debt, except for DW student loans. We will not need to make payments until she finishes ~5 years, in which time we will have the mortgage paid off.

If we currently making payments on the student loans those would have gone first.

Jim I have seen you post serval times 20% of gross should go towards financial independence? I am curious what you are basing this advice on?

[jIM_Ohio]

Originally Posted by rizzmo

Jim I have seen you post serval times 20% of gross should go towards financial independence? I am curious what you are basing this advice on?

I am starting to get into financial planning a little more, and I think most of the advice out there is geared more towards debt and less towards what makes most sense.

15% to 401k is out there by many. Having an EF is out there by many. Living on less than you earn is out there by many.

The 20% is a combination of all the above.
Send 15% to retirement accounts
Send 5% to EF or other financial issues (short and mid term goals).
Live on 80% of gross- meaning you are living on less than you earn.

[rizzmo]

Thanks for the explanation. It sounds like a good rule to follow for the majority of people.