Buying first home with student livng expenses loan.?

Hello all! My wife and I are both 22 and we have been married for 3 years with a baby boy about to turn 3 and a dog about to turn 1. I have a full time career making 3000/ mth. I have 2 $1000 dollar loans, a $7000 car loan, a $25000 car loan, and $300 credit card debt. We live with the in-laws currently and pay $350/ mth for rent. My mother in law watches my son while I work and my wife goes to school for $0 dollars. My wife's financial obligations to school a year are $17000. She can get approved for an addition loan of $17000 a year for living expenses. This is where the housing question comes in. Should I shack up at the in-laws or move down the street to own a house? I have a credit score of 657 currently and I could potentially qualify for a VA loan. Would this be a good idea to buy our own place? It's not awful here at the in-laws but it def. isn't home. Thanks in advance!

Update:

I am not a student. She has a loan/ grant for 17k currently. I agree with you guys I should probably wait. The main motivation for me was to get the 8000 tax credit. (10% of the total) We are not paying on the student loan. It will obviously start when she graduates from her specialized school May of 2011.

Update 2:

Yes I was military. I am now a Reservist in the Navy.

6 Answers

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  • garyg7
    Lv 7
    1 decade ago
    Best Answer

    Although your credit score is decent, a mortgage lender is going to factor in your monthly debt service when calculating how big of a monthly mortgage you can afford. The VA offers only a partial guarantee on the loan, so you must still qualify with a lender. Many lenders have tightened their underwriting standards so your credit score is not as good for buying a home as it would have been a few years ago. The percentages have changed since I last dealt with a mortgage, but even if a mortgage company lets you use 45% of your monthly income toward all debt service. In that 45% is the payments on all of your loans and your mortgage payment (includes the escrow payments of your property taxes and homeowner's insurance).

    Even with a VA loan, you still need some cash for closing. There will be closing costs (these vary by state), moving expenses, and you or your wife will want to make some changes (new blinds, paint or wallpaper, carpet, etc.). I would guess that you would need at least a few thousand to pay for miscellaneous items.

    To speed up your timetable, I recommend that you sell the car with the $25,000 loan and get something cheaper. You can then apply your monthly savings to your other debts and start saving money.

    You are already in debt for more than $34,000 which is very close to your annual income. Another $17,000 loan and your credit score will drop.

    Be nice to your in laws. They are doing a lot for you and your wife.

    I hope this helps.

    Gary

  • Rick B
    Lv 7
    1 decade ago

    Huh? You make $36,000 a year, pay out $17,000, have a $25,000 car laon and you want to buy a house? You're kidding right?

    You guys are in HEAVY debt. Why would two students living with parents have two financed cars?!?!?!

    You guys need to get completely out of debt, compile an emergency fund of 3 to 6 month's expenses. Both get CAREERS, not jobs, and save up a 10 to 20% down payment, PLUS about 6% for closing costs.

    You guys are a LONG way from uying a house. If you do try it, you will be bankrupt or foreclosed in no time.

  • 1 decade ago

    You guys need to pay down some debt before qualifying for a mortgage on that income. Save up for a down payment, even though you might qualify for 0% down with VA because they're a BAD idea. It's too late to close this year for the First Time Home buyers tax credit, so pay down your debt, save up for closing costs and down payment and wait and see what, if any, new tax credits there are for home buyers. Work to raise your credit scores by paying everything in full and on time, paying down all that debt, and not getting any new debt.

    PLAN for your future by Saving, Building Credit rating, and Paying down debt.

    Source(s): tax pro
  • 1 decade ago

    Your way behind on the earnings scale to afford much more than a matchbox. You have no idea how much it will cost to maintain your present lifestyle - stay at home and as far as the 17,000 your wife gets for housing - have mother in law charge rent and put proceeds in bank for a good down payment.

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  • Chrys
    Lv 7
    1 decade ago

    you were military and qualify for a VA loan ??? with a score of 657 no one will give you money for a house, not with all your outstanding loans.

  • Rudy
    Lv 6
    1 decade ago

    Stay where you are, and save/dont add to your debit levels

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