Newbie

[niquieg]

I'm very glad i've found this site, thank you to the admin and contributors.

My name is Nichole i'm 24
I have $89,753 in debt
-$89,082 student loan *the monkey on my back*
-$671 cc

my goal is to own my first home this time next year

[rebeccae55]

Welcome!

Why are you in such a hurry to buy a house?

[veronak]

Welcome, I was wondering the same thing...why are in in such a rush, I say pay down the debt first and save as much as possible. Good luck

[Harrison]

Welcome here. I'm same age with you.
I want to own a house in next 1-2 years, this has to depend on my business.
Anyway, good luck to both of us to own our house before 25.

[disneysteve]

I have a little different view, I suppose. I finished school in June 1993 with $102,000 in student loan debt. We bought our home in April 1994, less than a year later. We didn't let the student loan debt stop us from buying a home. We had no other debt (or maybe still owed a small amount on a car) and had a 20% downpayment for the house saved (with a little help from mom and dad).

It took me 12 years to repay the student loans. I certainly wouldn't have waited 12 years to buy a house.

So I guess my question is what do your current savings look like? Will you have enough for a decent downpayment on a home in a year? I'm old-fashioned and still like to see people put 20% down.

[myself]

Originally Posted by niquieg

I'm very glad i've found this site, thank you to the admin and contributors.

My name is Nichole i'm 24
I have $89,753 in debt
-$89,082 student loan *the monkey on my back*
-$671 cc

my goal is to own my first home this time next year

Nichole,
Are you done with school yet? If so, I hope that you have a very high income, merely because your student loan will become a very large payment soon.
I too would suggest to pay down most if not all of that student loan debt before buying a house.
Why?

1. That student loan is what some people have as a mortgage
2. The student loan rate will go up if you've graduated
3. The student loan payment will be upwards of $500+/month (I'm completely guestimating this)

After you payoff the student loan debt (or at least most of it), simply start making mortgage payments. Just pay the mortgage payments and estimated utilities (oil/propane/natural gas + electric + phone) and estimate repair costs (about 2%-10% of your mortgage payment) into your high interest savings account (i.e. EmigrantDirect, etc.). If after 1 year of paying these you feel comfortable still, then go for it.

I'm not trying to talk you out of home ownership, just trying to prepare you for everything you might experience along with home ownership.

[disneysteve]

Originally Posted by myself

I too would suggest to pay down most if not all of that student loan debt before buying a house.

I understand where this is coming from, but I don't think the OP gave enough info to make a recommendation like this. As I said, I had $102,000 in student loans. When I finished school, my wife and I were earning about $85,000. Not only did we have no trouble with loan payments and a mortgage, we made substantial extra loan payments and saved 6% of our income (which we gradually increased as my income rose). Less than a year after buying the house, DW quit to be a SAHM and we lived on my income alone, which was around $90,000 at that point.

We just lived way below our means, very frugally, and directed lots of extra money at the student loans, getting them paid off in 12 years instead of the 25 years they were scheduled for.

What makes sense for the OP really depends on her income, her savings and her overall situation. Maybe she is married and her spouse makes a ton of money. We don't have all the info here.

[myself]

Originally Posted by disneysteve

What makes sense for the OP really depends on her income, her savings and her overall situation. Maybe she is married and her spouse makes a ton of money. We don't have all the info here.

Agreed, you are 100% correct!
However, I'm err'ing on the side of caution, since she didn't mention all of the other pertinent info.
The rates are also not mentioned. I'm admittedly going by what someone I work with is paying in rates (7%), for consolidated student loans (which of course is another beast unto itself).

Do you agree that it might be wise to at least pay her savings account with the equivalent of a mortgage (PITI) + utilities for at least 6 months? That may give her a better feel as to if she can afford it comfortably I believe.

[disneysteve]

Originally Posted by myself

Do you agree that it might be wise to at least pay her savings account with the equivalent of a mortgage (PITI) + utilities for at least 6 months? That may give her a better feel as to if she can afford it comfortably I believe.

Absolutely. She needs to run the numbers, know how much the loan payments will be, how much the home will cost her, etc. I certainly don't think she should overextend herself. I just don't think waiting until the student loans are repaid to buy a house is a realistic suggestion when the loan balance is that high. I know lots of colleagues who are still repaying student loans, including my partner who has been in practice 4 years longer than me. He owns his home and a vacation home and does just fine.

[niquieg]

My rush is based on a few things

1. It's always been a goal
2. I'm tired of throwing money away renting (a 2 bedroom is $1200-1800)
3. Prefer to own a home with yard space for my kids

My current savings is about $15,000
I probably won't be able to save 20% by next year
My current payment on my school loan is $350 @ 5.25 fixed
Single Income around $40,000

[disneysteve]

Originally Posted by niquieg

I-$89,082 student loan

Single Income around $40,000

Do you expect your income to rise significantly anytime soon? I'm concerned about having student loan debt equal to well more than double your income.

What price home do you think you'd be looking at. Rule of thumb is to not spend more than 3 times income. Are there homes in your area for less than $120,000?

Also, you mention kids. Do you have kids currently or are you just thinking ahead?

[niquieg]

Originally Posted by disneysteve

Do you expect your income to rise significantly anytime soon? I'm concerned about having student loan debt equal to well more than double your income.

What price home do you think you'd be looking at. Rule of thumb is to not spend more than 3 times income. Are there homes in your area for less than $120,000?

Also, you mention kids. Do you have kids currently or are you just thinking ahead?

I'm working on getting a second job and increasing my income
Unfortunatly there aren't homes below that amount
I have a 6 year old and currently pregnant with my last

[disneysteve]

I wish you luck. I think paying off that much student loan debt and a mortgage is going to be a challenge unless you find a way to really boost your income.

By the way, I have to say that one of the most beautiful places I have ever visited is the harbor at Charlotte Amalie. I've been there twice and I could stare at that view all day. Last time, we took the cable car up to Paradise Point and then the nature trail up from there and the view is to die for.

[myself]

Originally Posted by niquieg

I'm working on getting a second job and increasing my income
Unfortunatly there aren't homes below that amount
I have a 6 year old and currently pregnant with my last

Well, I just found this site: St Thomas Real Estate US Virgin Islands Charlotte Amalie Condo Home Sales.

Notice the taxes levied, etc.
1.25%/$1,000 (which is based on 60% assessed value).

Seller pays: 2%-3.5% for government transfer tax. (this one really caught my eye)
Buyer pays: $1/$1,000 for recording fees (which isn't too bad)

Buildings start at around $200+ per sq. ft. when building (which is masonry).
2 bedroom condos range from $180,000 - $475,000 depending upon what finishing materials are used inside.

So, guessing you'd be buying a 2 bedroom condo (on the low side at about $190,000), you're looking at a mortgage of $1,296 (for a 30 year fixed at a 7.25% rate), and you have to add property taxes of slightly more than $100/month. I only chose such a high fixed rate, because your housing expenses would show up as 42% of your gross income (which I would think would be unreasonably high for most lenders).

If you're already paying that on your current salary, maybe it would be in your best interest to buy a condo.
I would suggest you start talking to mortgage lenders and seeing what a house would cost you to buy.

[niquieg]

I started feeling pitiful for myself and was about to push my home ownership goal back a few years. However my parents have agreed to match my down payment amount and i've decided on purchasing land and building as opposed to buying.

Thank you for the eye opener

[Scanner]

I've stayed out of this thread for a little while to see where it developed but I have to say DisneySteve's experience echoed mine.

When I graduated school, I had $52,000 in debt (that was good considering my average peer had $100,000).

Between setting up my business/practice, my wife got pregnant (or I got her pregnant - however you want to look at it). Anyway, the DW was "nesting" at the time and she really, really wanted a house.

I wanted to "play it conservative" and rent an apartment and work on the debt before we got a house.

As usual in life, the woman wins out on these kinds of decisions so we bought a house in 1997.

Well, as I have noted here before, this ended up being where the majority of our wealth is. Now. . .we did have a good sized downpayment to put down on the house (my wife's inheritance from her grandfather) so the situation may not apply. However, there was still risk at the time; I was worried we would lose that inheritance if we couldn't make the house payments.

I guess my point is I think the gov't is right on this - people who own homes accumulate wealth.

I'm not necessarily advising the original poster to go this way - just offer an experience, albeit isolated.

[mekish]

Originally Posted by rebeccae55

Welcome!

Why are you in such a hurry to buy a house?

maybe its the perception that house prices will continue to rise. Therefore, the sooner the better!

[alw_ays]

Buy the house. Trust me.

If you pay 1200 in rent that money goes NOWHERE. If you pay 1200 in a mortgage, that money is still YOURS. It went back into your house. It's called building Equity. The kicker: make sure your actually monthly mortgage is less than your projected rent, so you can "overpay" and put that extra cash on the principal, reducing your payment period and total interest. And, never get the loan for as much as you are qualified for. If you top out, your finances strain. If you stay low by $30 grand or more, you only have to be careful.

The worst that happens? You sell your house, pay off your mortgage, and get your money back. (Even worse would be forclosure, but you had better know that would be coming and prevent it by selling.)

[disneysteve]

Originally Posted by alw_ays

The worst that happens? You sell your house, pay off your mortgage, and get your money back. (Even worse would be forclosure, but you had better know that would be coming and prevent it by selling.)

Have you been paying attention to what has been happening in the real estate market the past year? Homes are staying on the market for months and months. Prices are dropping 10, 15, 20% in many areas. It isn't as simple as selling the house and getting your money back. Buying a house you can't afford is just asking for financial ruin.

[alw_ays]

hmmm...

Where I live, if you aren't putting an offer on the house the week it's listed, you're out of luck. There were 150 calls on my house AFTER I had it under contract as the very first caller.

As we were searching (from April to June of this year), being on-the-ball meant being just in time for the first back-up offer.

I suppose my image of the housing market is skewed by my narrow search area. Thank you to regional oil-booms!

However, I still agree with my statement that if foreclosure is a possibility, you should know it well in advance. Months. You should know where your finances sit and if you can possibly pull off that mortgage in two, four, even six months. Paying into equity is still, in my possibly-less-than-educated opinion, the absolute best option, when paying rent into nowhere is the alternative.