Need help making a financial decision

[dandlewood]

Hey guys, first time poster. Here's my situation: I'm married with a 9 month old son and looking to have one more child in the near future. We have been living in with my parents to save money and pay off debts. I currently have ~$52,000 dollars, 32 of which I have in a separate account that I had prior to marriage. I had no debts coming into the marriage and my wife...did. We're almost done paying off her credit card debt, but she still has ~$70,000.00 in student loans. I hate debt, but we're running out of space in our current home, so I have been considering purchasing a home. My savings instincts are telling me to suffer a little longer and attack the student loans, but I'm really not sure how much longer we can stay cooped up. Due to the size of her loans, she is not eligible for loan forgiveness, even though she is a public employee. I really don't know what the right move is here.

Relevant Info:

AGI: $90,000.00
Student Loan Payment: $412 per month
AVG House price: $200,000.00
Daycare Expenses: $15,000.00 per annum
Car (insurance+payment): $4920.00 per annum

[greenskeeper]

can you afford the larger house with the student loan payments? if so, go for it.

[disneysteve]

Welcome to the site.

If you can put down 20% and get a loan such that the payment including taxes and insurance won't exceed 28% of your monthly income and you will still maintain a 3 month emergency fund at the very least (6 months is ideal) then I'd say to go for it.

[dandlewood]

Thanks for the input, it's very appreciated. One of the things that troubles me is that I'm going to be pretty much at that 28% mark. I'll definitely take your (good) advice and wait until I have at least a 3 month buffer. As it stands, I can put down at least 20% and cover closing costs. Unfortunately, I'll still be in this predicament when I've reached that step.

[disneysteve]

One of the things that troubles me is that I'm going to be pretty much at that 28% mark.

I wouldn't let that stop you. Over time, a fixed rate mortgage payment generally becomes less of a burden and that percentage trends down. As you pay off other debt (car loan and student loans) it will free up income for other spending. Also, your income will hopefully climb over the years which also makes the mortgage payment a smaller percentage of income.

[sblatner]

An added benefit is that the mortgage interest, property taxes, etc., might be tax deductible so you will owe less taxes.

[snafu]

dandelwood, welcome to SA. A long as DW is onboard and no longer running up CC debt, it's really is all about the numbers, succinctly outlined by DS. I add that it's not smart to let emotion or decor influence your decisions. A can of paint is $ 30. to fix lots of problems.

I hope you understand that listing price is totally negotiable. You can offer what you believe the value of a chosen home and ask for help with closing costs and anything else you want. As buyer, you can always offer more if the seller rejects your offer.

I suggest you get financing in place first, starting with your current financial institution, a Credit Union and comparing with www.bankrate.com. Just now, a lot of smaller banks and electronic banks are awash with money they need to 'loan-out' to meet their legal obligations. I believe a good broker can help identify the best rate given your qualifiers.

You might like to track house prices on Zwillow. It's not 100% accurate but offers a short term picture of real estate values in your search area.

[disneysteve]

You might like to track house prices on Zwillow.

Just to clarify, that should say Zillow, not Zwillow.

[dandlewood]

Thanks for the continued advice! I'm not sure what you mean by DS. The only context I've seen that in is "Dear Son" and I'm not sure I should be turning to my 9 month old for the best financial advice . I have been scouting zillow and realtor.com for the past 3 months to get a complete understanding of the areas around me. I've established 4 zipcodes I'm willing to move to based on school system, taxes, community, location, and proximity to our mutual jobs. I've even picked out a 5 or 6 potential homes that fit in our budgeted strike zone. I just worry about buying a home that has critical issues not found by an inspector. I feel like after talking to you guys I've been able to at least decide on gathering a little more capital to ensure a smoother transition. I've Convinced DW that we need to tighten the budget for at least a couple months to attack the principle. Paying as we do now means we wouldn't be free of these damnable loans until 2042. If we pay an additional 250 dollars per month, we can get rid of them by 2023. Not optimal, but at least it's a light at the end of the tunnel.

[disneysteve]

succinctly outlined by DS.

I'm not sure what you mean by DS.

Many of the regulars here use DS when they are referring to one of my posts (disneysteve). I understood why that would be confusing though. People really need to stop doing that.

[snafu]

so sorry, Disney Steve had offered excellent advice and I admire his ability to say so much so succinctly.

[midlifefinance]

As for my personal point of view, it's better to get rid of the debt first. It will give you more breathing space you're paying off your debt. Staying at home with your parents, is something that they will understand.

When you are ready leave the house, just give them a token of appreciation, that would be sweet!