Should we put off the house for 5 years and pay off the student loan?

[disneysteve]

Originally Posted by ScrimpAndSave

I guess I get impatient because I am only living off of about $100 (after rent) out of each paycheck and I am sending the rest to savings...and it is difficult. No frills...no new clothes...no new makeup...living off what I have in stock in the pantry...using as little gas as possible...eating out once a month...and I end up just thinking, ENOUGH already...

But I guess not. I could free up some money and save less...but I know that stashing $2,000 a month into my ING account on my $50,000 salary is a really great thing to do...and I don't want to stop doing that.

I'm hearing some frustration and self-deprivation in your post. You might find yourself a lot happier if you doubled your disposable income to $200 and decreased your savings to $1,900/month. That would have an inconsequential effect on the savings total but would let you ease up the purse strings a lot and live a little more. Something to think about.

[jIM_Ohio]

Originally Posted by disneysteve

I'm hearing some frustration and self-deprivation in your post. You might find yourself a lot happier if you doubled your disposable income to $200 and decreased your savings to $1,900/month. That would have an inconsequential effect on the savings total but would let you ease up the purse strings a lot and live a little more. Something to think about.

I agree with steve

[MiikeB]

Originally Posted by disneysteve

I'm hearing some frustration and self-deprivation in your post. You might find yourself a lot happier if you doubled your disposable income to $200 and decreased your savings to $1,900/month. That would have an inconsequential effect on the savings total but would let you ease up the purse strings a lot and live a little more. Something to think about.

I 100% agree. Use the extra money to go on a nice date with your Fiance every other week or something.

[noppenbd]

I agree as well. It's like that old 38 special song, "if you cling too tightly, you're gonna lose control"...

[ScrimpAndSave]

Yeah I guess so. I don't know. I am afraid it is going to make my home purchase further away if I spend anything on myself. The best that I could afford right now would end up being something like this:

MLS

Which is DEFINITELY be a "starter" home...not one I would want to live in for more than 5 yrs.

[sakigt]

Dream homes come with dream expenses filled with dream furniture and pay dream taxes.

You shouldnt sacrifice the all of your now for the future.

[ScrimpAndSave]

Well...my dream home is pretty modest. I'm really not looking for anything huge or brand new. I would just like to have a garage and at least 1.5 baths.

[noppenbd]

I'm sure you've posted about this before, but is there a reason you need to save $80K for a $175K house? I mean, not that it isn't great to put down 40% but if you are chomping at the bit now, maybe you are being too aggressive. I would think 20% plus closing costs and a few thousand for furniture, etc, would be enough. That would probably be closer to $45K.

[ScrimpAndSave]

No no...I am saying that if I bought NOW I can afford something that is $175k. If I save $80,000...I would look for a place that is between $250k-$300kish.

[asianpear]

don't rent; buy a house that has payments that will be in the $600-800 p/month range. make it a "fixer upper". use your downtime to repaint, landscape, and put in good/decent floors. this will make you at least $15,000 on a $70,000 home (which gives you a 2 bed/2 bath brick home in the south with a yard!). Sell the house once most of the college loans are payed off. Buy a better house (repeat previous steps if you want to get even better home).
Renting is a waste of money when payments on something that you can own and resell are equivalent.

[disneysteve]

Originally Posted by asianpear

this will make you at least $15,000 on a $70,000 home

Have you been paying attention? Home prices have been falling or flat most places. You could buy a house today, spend a bunch of time and money fixing it up and then not be able to sell it even for what you paid a year or two from now. And that's if you can even sell it.

I don't think now is the time to be looking to buy and flip a fixer-upper.

[ScrimpAndSave]

No...I am really not interested in a fixer. My fiance will be working 10-12 hour days...we don't have a lot in savings right now...we simply won't be renovating and flipping a place.

[KB24]

Some things to think about...

Student loans usually have pretty good interest rates, so you may not need to rush paying those off in a hurry. However, there is some downside if you plan on buying a home. If you are planning on qualifying for a home loan, you monthly mortgage payment cannot exceed (about) half of your monthly income minus monthly debt. The student loans could hurt you in qualifying for the loan you want.

Buying a dream home usually means more space than you need. Think about furnishing the home, the gardening, the housekeeping, maintenance, etc. that goes into owning your dream home.

In my opinion, owning a home is definitely better than renting, but you need to be ready for the responsibility.

[jIM_Ohio]

Originally Posted by KB24

Some things to think about...

Student loans usually have pretty good interest rates, so you may not need to rush paying those off in a hurry. However, there is some downside if you plan on buying a home. If you are planning on qualifying for a home loan, you monthly mortgage payment cannot exceed (about) half of your monthly income minus monthly debt. The student loans could hurt you in qualifying for the loan you want.

Buying a dream home usually means more space than you need. Think about furnishing the home, the gardening, the housekeeping, maintenance, etc. that goes into owning your dream home.

In my opinion, owning a home is definitely better than renting, but you need to be ready for the responsibility.

His loans have rates between 6 and 8 percent.

IMO S&S is overanalyzing every aspect of his situation online, but that might not be bad -it just leaves S&S open to lots of feedback which might lead to paralysis by analysis.

I would phrase the fixer upper advice differently. Buy a modest home now with payments in $800-$1000 range and get the tax benefits for owning NOW at a price which beats renting.

disclaimer- do the math and make sure you could itemize on a $1000/month mortgage and also make sure $1000 month mortgage beats a $700/month rent payment on a tax adjusted basis.

Then knock off the student loans (the tax benefits of all the above should allow ample financial room to pay extra to loans).

Once loans are paid off, buy the bigger house or dream house if you will.

If the first house is skipped, the only thing going on is "time". Meaning the patience to wait until finances are ready before the big purchase. If inflation goes UP UP UP owning a house will be a GREAT investment, there are immediate tax benefits to the purchase, plus furniture can be slowly acquired to fill the smaller house now.

[zetta]

I would vote for keeping the student loan and buying the more modest house (not the dream house).

1. Now is a good time to buy low, and if you plan to stay in the house for 5-10 years, you have a good chance of catching the next upswing. Where if you pay off the student loan first, you may miss the real estate turn around if it occurs within 5 years.
2. Most marriages that fail do so within the first 5-7 years. If you were to be unlucky in that department, the house is an asset you would split upon divorce, where he keeps all the benefit of a reduced student loan.
3. Your preferences in what's important in the dream house may change after owning your first house.
4. If life happens and you decide to relocate for a great career opportunity, the less expensive house would probably be easier to sell or rent out.

[ScrimpAndSave]

Thank you all for your responses.

The current plan is to rent my dad's home for $400 a month (CRAZY cheap around here...this includes utilities and everything) and buy around January 2010. We will have about $80,000k in savings by then. If we wanted to extend it until I am off from school in the summer around June 2011, we would have approx. $100,000 in savings.

The plan is basically to buy my dad's house...he said he would cover closing costs...and we would buy at fair market value...no downpayment gift...no gift of equity...and the house would probably appraise for about $300,000. My dad mentioned giving us 6% off because that is what a realtor would make on it...we will see.

I know...I am really, really good at beating a dead horse.