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

[ScrimpAndSave]

So...I just started thinking about this...

When my fiance gets out of school, he will have $140,000 in student loan debt. Should we pay that off first before even buying a home? My idea was to aggressively save for two years, have $80,000 for a downpayment on a home...buy a modest home...and then have a mortgage and a student loan payment.

Which is better? We could have a 5 year plan and try to pay off his debt first...rent WAY cheap...we have good salaries and would be able to do this and be 100% debt free except for a mortgage in few yrs...

[snafu]

More importantly, would fiance qualify for a mortgage? How certain are you and your fiance about job opportunities? It seems there is an |American led world-wide recession happening. People are losing their jobs and homes.
What savings do you have? What additional debts have/will you acquire beyond the $140,000.? What is the housing market like in your community? What are your expectations for your 1st home? Would you consider seeking a home with a basement suite to rent/generate income ?
Lots of questions...

[disneysteve]

I think there is a lot more to buying a house than the finances. At some point, you just want your own place that you can decorate and renovate and make your own. I had 100K in student loans when we bought our house and I wouldn't have done it any other way.

[ScrimpAndSave]

More importantly, would fiance qualify for a mortgage? Both of our credit scores are above 750...

How certain are you and your fiance about job opportunities? I am a teacher and am tenured and locked into a contract. My salary will go from $50,000-$85,000 in 4 years. My fiance gets out of law school in May 2009 and has a job and will make $45,000 his first year...slow to rise after that.

What savings do you have? I have $10,000 saved right now.

What additional debts have/will you acquire beyond the $140,000.? None.

What is the housing market like in your community? Good quality construction is around $300,000.

What are your expectations for your 1st home? $300,000 would get us a modest home that we could stay in long term.

Would you consider seeking a home with a basement suite to rent/generate income? No.

[ScrimpAndSave]

Disneysteve...I understand. And that is how I feel now...I want a modest home that we can slowly update and afford comfortably...but with our salaries...we could be debt free while renting for around $600-$700 for a few years. I'm trying to be realistic and make the smartest decision possible for us.

[disneysteve]

Originally Posted by ScrimpAndSave

I'm trying to be realistic and make the smartest decision possible for us.

Understood. I'm just trying to make the point that not every decision is about the money. There are other issues and factors and emotions that play a part.

I've posted before that I paid off my student loans in 12 years, 13 years ahead of schedule. They had fixed low interest rates. I could have done much better in the long run had I invested my money instead of prepaying the loans. But I hated having them. Had I stuck to the 25-year repayment schedule, I would still have been repaying my student loans when my own daughter was in college. I just wasn't doing that. Was it the smartest decision financially speaking? No. But it was the decision that was right for me and if I had to do it all over, I'd likely do the exact same thing even knowing what I know now about finance and investments.

[ScrimpAndSave]

Maybe I just have to find that happy medium. I am SUCH an all or nothing type of person. I either want the "dream" house or not. I don't want a "starter" home. Then I started thinking...if we do rice and beans/beans and rice till the spring of 2012...we can be 100% debt free...then start thinking about buying a home...

I guess it depends on how things are when we are married. He's a very simple, live out of a suitcase guy...and doesn't share my house fever in the least.

[gamecock43]

Scrimp...my new husband "did not share my house fever" at all when we were dating too. I have wanted a house for 3 yrs now and have been saving and talking and planning for 3 yrs straight. My then fiance just kind of supported me but didn't get too involved other than looking at listings online.

We got married 2 weeks ago and BAM! He is suddenly so house hungry I am the one putting on the brakes. If it were up to him we would have made an offer a week ago and we'd be packing our stuff up right now!

I asked him why the change of heart and he said that as soon as we got married he realized "we were married and he wanted to start off the rest of our lives in our dream home in our dream city and kind of really start our lives together."

[arthurb999]

What kind of work is she in... I mean is she a doctor, lawyer, etc...

[MonkeyMama]

Personally, in this market if you could rent comfortably for $600 or $700/month? What's the rush? I'd at least hold off until the market starts to pick up.

(I say this as someone jealous you could rent that cheap - we bought very young but only because it was cheaper than renting. $700? I wish).

I think for the long run you will do both. But if are truly able to rent that cheap - save up a nice down payment and knock out a chunk of those loans... I'd do the rental thing for a while. Maybe not 5 years. But I'd consider a while longer.

[ScrimpAndSave]

I'm a teacher. Not a doctor or a lawyer. (He is graduating from law school)

Yes, we could live in a really nice place for $800...or we could rough it a little for around $600 (not including utilities).

[jIM_Ohio]

The bigger issue is the other life changes going on around you.

1) Wedding
2) College graduation
3) new job

Why add more to this in a 2 year period?

You don't need the loans paid off, but even 6-12 months of renting will probably help cash flow (while paying down the loans).

[ScrimpAndSave]

...I guess. :*(

[arthurb999]

140K in student loans is a substantial amount of debt; however, it really depends on the type of job he gets and starting pay.

If he graduated from Harvard Law… he could get an offer working in NYC and make some serious money so the situation would change dramatically.

[jIM_Ohio]

I don't think you will see a downside to waiting 6 months after getting married to buying a house. Even waiting 12 months has little downside.

But adding a house to the other life events in such a short amount of time might let a detail to two escape the wedding planning, or the graduation/bar exam.

Slow down A LITTLE to remember the events which are once in a lifetime. It will allow you to pay down the debt some... then plan to move in about 12 months.

[GREENBACK]

I clawed my way completely out of debt before buying a home. I rented about 7 years and didn't have to deal with all the costs of first time ownership(can be substantial). It's tempting to go for it and get the dream home but be aware that it's more than a monthly payment. I would personally get rid of as much debt as possible. I think you'll be glad you did.

[JinCO]

I was in a similar situation about 3 years ago and decided to buy a house and I don’t regret this decision. For us, the mortgage interest deduction was an important consideration as this was / is our only major deduction come tax time. As long as you live below your means and can allocate money towards the loan repayment after purchasing a house, I don’t see an issue in buying the house. If you buy a house, how long do you think it will take to pay off the student loans? We focused on paying off the high interest student loans first and knocked these off in the first 3 years after school. Most of our remaining balance is at 2.65%, which we are in no hurry to pay off.

[Snave]

With that new house also comes those expenses that you think you can do without and can wait a year or two. Them BAM! You are out one weekend and all of a sudden have a new couch or curtains or something like that. The first year of home ownership is more costly than you anticipate b/c of some of these expenses. While you may say you can fight the temptation, your "dream house" needs blinds or a few new rugs, etc... and you do spend more than you will want.

[ScrimpAndSave]

Yeah my initial plan was to stay with my dad (what he wants us to do) for a year after the wedding and then buy. We should have $80,000 then...I was going to put that towards a $300k home...then I started to think that I can wipe out a LOT of debt with it...

[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...can't I just put 10% down a get a nice, modest home?!

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.

SO...I for now I will just dream of houses and find different ways to make extra money here and there.