How should we handle our student loans and buy a house at the same time?
My husband and I want to purchase our first house this year. He is an accountant with a decent salary of $37,500 and I am a stay at home mom. We own both of our cars, have no credit card debt, have credit scores in the upper 700's, and have about $28,000 for a down payment. Our only debt are the student loans which total about $60,000. We live very simply, we don't eat out extravagantly and we always do our homework before purchasing even the simplest of items, for example blue jeans. This allows me to stay at home with our daughter. However, he is in the grace period for the student loans (we are in our 30's btw) and they come from many different lenders. The total monthly payment amount is about $600. We have considered consolidating the student loans which would give us an easier payment of $350 a month. We know that mortgage lenders look at credit inquiries. Should we consolidate now or wait until we are getting ready to apply for a home loan which would be in about 9 months? Does it seem possible that we could get approved for a home loan somewhere? The economy is bad right now and we aren't rolling in the dough so I want to make sure that we handle this the correct way. Please no inquiries that we need to pay off our student debt first. It took us making MANY sacrifices to pay off our cars, credit cards, raising our credit scores and saving money to get at this point. We are ready to invest our money. Thanks! Meredith
- gnightgracie72Lv 41 decade agoFavorite Answer
Your husband is an accountant - so am I - and I think I might be giving you feedback that you already know. Consolidating your loans is a good idea IF you get a lower interest rate in total. In the long run, it is not really about the monthly payment but about the total amount you pay back... unless you are willing to pay more in interest in order to get a lower monthly payment now. Given your very intelligent planning so far, I am guessing you won't want to pay more in the long run. The impact to your credit report will be minimal if you consolidate, so I don't think that should be a big concern. Getting approved for a loan now is hard - but there are also a lot of great deals on houses now, so it is a good time to buy. I wish you lots of luck!
Edit - I see the other answer. While PMI is tax deductible, you are in a low income bracket and when you itemize you won't get the full benefit. Putting 10% or more down on the home will prevent you from paying PMI and save you money.
- Anonymous1 decade ago
I would consolidate the loans to lower them to 350 a month and then work on paying them off early.
In regards to the house. With a 37,500 income, I would use NO MORE THEN 20% of my gross monthly income for housing.
This works out to a loan payment of 625 a month. At 5%, 30 years, this would be a loan of 100,000. Plus your downpayment. Plus closing costs of around 3%. GET THE SELLER TO PAY ALL YOUR CLOSING when you make the offer.
Downpayment: Do NOT use all the 28k for downpayment. Keep some in the bank and then continue to save.
Depending on the house price, I would go with FHA, with 3.5% down. Yes, there is PMI, but it's tax deductable.
- 1 decade ago
$28k would be 20% down on a property priced at $140,000. if you can find such a low priced condo/house then you have a chance. otherwise, it appears unlikely you will be approved for a higher value property because of the very high student loan debt and single income (you would also have trouble keeping keeping up with all house related payments).