Author Topic: Down Payment vs Student Loans  (Read 11298 times)

John Spartan

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Down Payment vs Student Loans
« on: April 17, 2013, 12:55:30 PM »
Hey all,

I have searched the advice threads, and seen similar topics...but I figured I'd throw my specific scenario at you guys anyway and see if anyone has any particular advice.

I'm graduating pharmacy school in about a month.  I have an unholy sum of student loans.  I have already started paying them down, but am sitting at about 180k (with interest rates between 6.8 and 7.9%). 

My wife and I have no other debts, but we would like to buy a house in the next couple of years.  We have about 30k saved up right now.  Currently, her take home pay (after taxes and 401k deduction) is 34k a year.  I will start a residency in July which will pay me 45k (before taxes) for the year.  After the one year residency, my income should increase to 100 - 120k (pre-tax) annually.  We currently live in DC, but plan on moving to Texas after residency.  The housing situation is much more palateable there, and we'd like to buy a house while we can still report her income.  Our tentative plan would be to live with her family for a year rent free while we locate/save for a house.  Then buy our own place and try to start a family (my wife would reduce or stop working at this point).

I guess my question is...is this sane?  I fully appreciate the gravity of my student loans and recognize they are an absolute emergency (they cost me about $25 a day...every day).  At the same time, there are benefits to home ownership (tax deductions, equity, etc...).  I feel like the "safest" plan would be to knock out my loans as quickly as possible, and then worry about the house.  But after we move, we don't want to burden her family too much (plus we'd like our own space).  If we can keep our emergency fund intact while saving up enough for a 20% downpayment....and then focus everything on the loans would that significantly cripple us in the long term?  It may be less safe, but at least we're building equity, gaining the tax deduction, and the mortgage shouldn't be at the 7% that my loans are at.

Is there something I'm not considering here, or does anyone have any advice regarding this situation?  If any more information is needed, please let me know and I'll be happy to share.

Thanks in advance!

Reepekg

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Re: Down Payment vs Student Loans
« Reply #1 on: April 17, 2013, 01:42:21 PM »
I guess I'd start by asking why you have 30k "saved up" when you've got 180k in loans. Any of that money put towards the loan today is a 7.9% return. Keep a safety margin that makes you comfortable, but that's one heck of a safety margin when it sounds like you have a residency lined up.

Your plan to live rent free for a period of time sounds socially difficult but financially smart. My wife paid off all of her 35k of student loans in a year or two by living at home.

Any down payment you save up is just borrowed student loan debt. If you are set on buying, I might try to buy with the smallest down payment possible, put everything towards the student loan until it is paid off, then put everything towards the mortgage. Your timing might be the most important aspect here. Pay off as much of the student loan as you can, delay buying the house as long as you reasonably can, and save up the down payment at the last minute when you're ready to buy. This will also dissuade you from taking on more house than you can afford.

Another Reader

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Re: Down Payment vs Student Loans
« Reply #2 on: April 17, 2013, 01:48:39 PM »
With those interest rates, there's no way in your shoes I would buy a house until the loans are paid off.  Enjoy the free rent at your in-laws, and when you conclude you are wearing out your welcome, rent something cheap and close to your job.  Once you are permanently employed, your position is stable, and the debt is paid off, then start thinking about buying a house.

John Spartan

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Re: Down Payment vs Student Loans
« Reply #3 on: April 17, 2013, 04:48:09 PM »
Thanks everyone for the replies so far!

Dmy0013

I am quite sure about the interest rates.  Here is the breakdown:

$113,647 @ 6.8%
$25,500 @ 0% (this will become 6.8% 6 months after I graduate)
~$43,000 @ 7.9%

I can tell you from my anecdotal evidence (I monitor daily on mint)  that they currently increase by about $25 a day.  I realize that will increase further in about 7 months.  I'm obviously focusing my monthly payments thus far (no payments are technically "due" until 6 months after I graduate) on the 7.9% loans.  How did they get so high?  That is, unfortunately, the price of 4 years of full time professional school.  I was debt free when I entered.  Knowing what I know now, I'm not entirely sure it was worth it.  Don't get me wrong, I love the profession, and I'm very excited to be where I am.  But unfortunately, I was very foolish with money before entering pharmacy school (and for the first 2.5 years of the program).  I never took on credit debt or anything...but I spent wayyyy more than I needed to.  Finally, at the beginning of 2012, I finally hit "crisis mode" and started feverishly researching how to fix my finances.  Luckily enough, I came across this site.  In the past year, we've gotten rid of all 15k of my wife's debt (student loans and car) and accumulated the 30k we have now.  There was a lot of selling things (my car included), part time work, a small inheritance, and frugal living.

I realize 30k is a lot to keep around.  Our thoughts in keeping it were that it would serve as an emergency fund (we need about 10 - 11k for 3 months) and the rest was future down payment. 

So far it seems pretty unanimous for paying off the loans entirely before getting a house.  Are there any arguments FOR getting the house?  Thanks again everyone for advice so far.  I really appreciate your input!


EMP

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Re: Down Payment vs Student Loans
« Reply #4 on: April 17, 2013, 05:03:34 PM »
Not to rain on your parade, but you might want to double check that the interest on those loans at 6.8 will still be subsidized by the gov't during your grace period.  They put an end to that recently. 

Fletch

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Re: Down Payment vs Student Loans
« Reply #5 on: April 17, 2013, 05:20:13 PM »
I could theoretically understand a little flexibility in not entirely paying off the loans before you start saving/looking for a house. If you threw half the $30k at the 7.9% loan now, worked aggressively at them over the year of residency and the first year of high income, you could get them down to less than $50k. Around that level you could start making a case for regular debt payments while you focus on coming up with a down payment, especially because with very high income and essentially free rent the down payment should accumulate quickly.

Of course, that depends on the size of down payment you need and how much you can throw at the debt over the next 2 years. There is a middle ground between waiting years for an ideal debt situation and your timeline of applying for a mortgage while you still have 2 incomes, but you have to evaluate where that middle ground is based on your personal values and priorities. And evaluate if you'll have the discipline to keep putting extra funds toward the debt after the house and family enter the picture.

ontheupandup

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Re: Down Payment vs Student Loans
« Reply #6 on: April 17, 2013, 08:41:12 PM »
I have nothing useful to offer here, but am very interested to read the replies coming in! My husband and I are in a similar situation (he just graduated from dental school last spring and I'm just finishing up a grad program), and it's feeling like NOTHING is the right decision. It's paralyzing to even think about spending on anything that isn't the loans at this point, but it's also hard to factor in all of the opportunity costs that might go along with making one set of decisions over another.

simonsez

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Re: Down Payment vs Student Loans
« Reply #7 on: April 18, 2013, 05:11:29 AM »
If it is any solace and these are the types of loans (grad plus federal school loans) that I had/have as well, then your interest rates will probably get a quarter % deduction if you elect to pay them back using an auto debit program bringing them down to 7.65% and 6.55% respectively.  To maximize the proportion of payments going toward the higher interest rates (I use rates in the plural as I have 14 separate federal loans with rates varying from 2.14 to 7.65) I changed my payment plan to the extended and graduated plan.  While this seemingly locks me in to pay back the most interest over 25 years, I have no intention of staying anywhere near that amount of time on the plan.  I just did it so the automatic payment each month takes out the minimum allowed from the loans (including the lower interest ones).  Then, whenever I feel like it, I make additional payments directed at the 7.65% loans.  YMMV of course but I will say my day always gets a nice boost to it whenever I make those additional payments.

John Spartan

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Re: Down Payment vs Student Loans
« Reply #8 on: April 18, 2013, 06:34:35 AM »
EMP - I just had to complete "exit counseling" for the loans.  According to that, my subsidized ones should stay that way until December.  I think they may have been grandfathered in.

simonsez - I knew about the 0.25% interest deduction.  I had not considered going for the extended repayment plan though.  I was just planning on paying the ~$2100 each month via the standard plan during residency...and then once my income increases throwing every single extra cent at them.  Your way seems like a great idea.  Have you happened to run any calculations to see how much it would save?  My very rough top of the head estimate gives me about $500 a year difference by paying the higher interest off early.

All - I guess part of our anxiousness to buy house stems from the desire to start a family.  We do have a somewhat limited window just based on the logistics of my wife's age (there is a lot more risk for both the mother and baby after the age of 30).  I know it's not a guarantee by any means, but still.  And neither one of us would like to be living with my wife's family (or in an apartment) once the hopeful future-baby is born.  Plus, with my wife planning to not work once the baby is born, it would be easier to get a home loan while we can still report her income.  It's not that we'd use that to get more house than we can afford...just to make the overall process easier (especially with the debt to income ratio we'd have).  Anyway, now that I'm done crying you all a river, it seems like that's the reality we're going to have to face.  I figured paying the loans first would be in our financial best interest, but wanted to get other perspectives as well (mostly because we just really want to have a house :))

Thanks for all of the insight so far, and please add more perspective if you have it :)

Another Reader

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Re: Down Payment vs Student Loans
« Reply #9 on: April 18, 2013, 06:43:14 AM »
Really wanting a house does not mean you can afford one.  If you can't qualify on your income alone and you know your wife is going to quit and stay home, then you cannot afford the house you want to buy.  Either buy the house you can afford, or have the baby in a less expensive rental and wait until you can afford to buy what you want.

Get your loans paid off.  Otherwise you will be in debt forever.  Once they are paid off, your one income will qualify you for more house, if thar's what you really want.

Christiana

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Re: Down Payment vs Student Loans
« Reply #10 on: April 18, 2013, 07:34:06 AM »
If time is starting to run out on the biological clock, then definitely prioritize having a child before buying a house.  Living in an apartment with a baby/child isn't the end of the world, and there is some benefit to being free of maintenance and yard work during the exhausting early years.  Having stayed at home in an apartment with three children for a while, I'd recommend looking for a place with good soundproofing, an easy path in and out (for lugging child and equipment), and enough "places to be" both inside and outside that your wife and child won't go stir crazy.

simonsez

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Re: Down Payment vs Student Loans
« Reply #11 on: April 18, 2013, 07:49:39 AM »
Nope, never ran the numbers to get exact figures.  Not that I'm lazy in that regard, just that my disposable income/consumption is not the same each month.  Some months I throw an extra $500 at my highest interest loan with the highest balance (in addition to my automated monthly payment), some months I will put $1000 at once or $500 on 2 different dates.  Since the extra payments vary, in both by amount and day of the month on which I make them, I scrapped the idea a long time ago of figuring out how much I was really saving and just knew every time I made an extra payment, I was coming out ahead rather than paying back using the standard plan even if you made extra payments on that plan as well.  I do have a spreadsheet detailing each payment, automated and additional, with the principal and interest alongside the original standard plan for each and how much interest and in total I would have paid over those 120 months.  So I guess I'll know at the end exactly how much I saved, at least compared to the standard plan, but it's not requisite for me right now that I know that figure beforehand.

It took maybe 3 or 4 mouse clicks when I switched over to the different payment plan so it took perhaps 10 seconds??  On a per hour basis, the hassle will be worth it in virtually every case of repayment provided that the amount I am paying in total each month is at least equal to the amount on the standard plan.

The only real downside is you have to be vigilant and can't forget to make the extra payment.  Not that it would be the end of the world, but you know, that's sorta the whole point for doing it in the first place.  In this world of automation, if you want to save on interest by paying proportionally more on the higher interest loans, it will take the manual phone call or web self-service each month.  Terrible I know.  I guess that's what reminder notifications are for.
« Last Edit: April 18, 2013, 07:57:28 AM by simonsez »

SwordGuy

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Re: Down Payment vs Student Loans
« Reply #12 on: April 18, 2013, 10:13:08 AM »

First, getting a house loan to "save money with the Mortgage Interest Tax Deduction" does not work.  Ever.

No loan = 0 dollars to the bank in interest.
$1000 income that might have gone to interest is now taxed at, say, 30%, so you pay the Feds $300.

Loan with $1000 mortgage interest = $1000 to the bank in interest.
$1000 income devoted to interest payments means you don't pay the Feds $300.
You are losing $700 a month by "saving money" this way.

The banks like it, though.  Personally, I would rather contribute the $300 to reduce the national deficit rather than to a banker.

Here's the only way to make money with that deduction that I can think of.  You to decide to buy a house for $100,000 in cash.
The buyer says, no, he'll only sell it to you for $1 plus $99,999 in interest.  Note that $1 + $99,999 = the same $100,000 in cash you wanted to pay anyway.   You take the tax credit on the $99,999 interest, reducing your fed tax liability by a fair bit.

I suspect you would also save money on room and board once you're in prison on some charge or another, but I could be wrong on this last point.

Second, your spouse doesn't need to quit their job to "start a family" until she's pregnant and due to deliver.

Third, that newborn infant will be confined to a crib or your arms for quite some time.  They don't need a big house with a big yard.  They can't use it at that point.  Nor will they care.

Fourth, as long as there's a park nearby that's not chock full of derelicts or otherwise unsafe, you don't need that big yard for several years.

Fifth, if you're like most American parents nowadays, you won't let the kid play in that big yard by themselves anyway because it might be "unsafe".  (At least not until they are old enough to run away and make lots of noise while doing so.)

In other words, all the reasons you've given for buying a house you can't afford in order to start a family have no supporting basis in objective reality.

Get a cheap apartment and pump that money into paying off those student loans.  If you keep your living expenses really cheap for the next 2 to 4 years (and pump your income up to the $100 to 120k range), you can have those student loans off your back forever.   So, even if you had the kid a year from now, just after moving out of your relatives' home, you could easily afford a house when your kid is 3 to 4 years old.  If you kept your same inexpensive lifestyle for 2 more years, you could have a paid for house by the time your kid is 7 years old.   

They you would have the money freed up to do loads of fun things with your kid, who would be of an age to start appreciating it.


jrs

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Re: Down Payment vs Student Loans
« Reply #13 on: April 18, 2013, 01:28:10 PM »
All values are my guestimates.  always double check.

Student Loans:
Principal: 1136472550043000TOTAL:182147
Monthly Interest due: 644144.5283.08TOTAL:1071.58
ballpark 15 year payoff: 1275.37286.17 521.97 TOTAL:2083.51
ballpark 10 year payoff: 1591.06357    641.42 TOTAL:2589.47
ballpark 5 year payoff: 2538.12 569.5   999.75  TOTAL:4107.37


Estimated Household Net Monthly Income:
WifeYouTOTAL: notes
2830.530?2830.53 current situation
2830.532735.205565.73 you=resedency, wife still works
2830.536082.268912.79 You=post-residency, wife still works
06082.266082.26 You=post-residency, wife stays home

  • imo: you can't afford a house right now. At very least you MUST wait until after residency and you have that first 100K+ paycheck in your hand.
  • If you insist on having a house, I am seriously thinking, go FHA loan with 3% down payment, ballpark 3.7% interest.  Why? Private mortgage insurance costs are trivial compaired to the overbearing pressure of those student loans.
  • imo: houses don't matter till the little one enters grammar school.  This might give you 6 or 7 years to delay purchase.
  • exactly when are you planning on being debt free, an important milestone when planning for retirement?  age 40?  age 45?
  • I really wish you had mentioned the house price you are looking at.  a semi-rural 40k is much different than an urban 150+K.

twinge

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Re: Down Payment vs Student Loans
« Reply #14 on: April 18, 2013, 01:46:51 PM »
Here's my 2 cents:
1. I would put 25K of your 30K towards that 7.9% loan right now.  You can find lower credit card interest than that on the off chance you have a greater than 5K emergency and no alternate source of money. Personally I would put 28K of it towards it, but people vary...
2. Focus on kicking out the rest of that loan--stay rent-free with parents until at least that is done.
3. Rent an inexpensive place right near your work to preserve time and commuting money.  Keep focused on paying down loans.  Having a small apartment helps control spending. 
4. Don't wait to have a child if you don't want to.  We had our first child while renting and it was GREAT because having a new child is hard and if you're also first time homeowners that's hard too.  If you rent you can focus your energies on parenting and not mowing lawns and painting walls etc.   Plus you have time to really get to know the scoop on an area-its schools etc. by the time your child will start school and then you can buy wisely. We became homeowners with our 2nd child and that was more difficult to manage everything.  Maybe set a goal of buying a house when your child is about to enter kindergarten.  That way you're making a commitment to stability when moving around has a bigger effect.

Reepekg

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Re: Down Payment vs Student Loans
« Reply #15 on: April 18, 2013, 03:27:20 PM »
Others have hinted at it, but you are in need of a Mustachian punch to the face for equating baby = new house. This is American consumerist nonsense. Babies are squishy little things that sit around in one spot pooping all day. Human beings all over the world are right this very minute successfully having and raising babies in apartments!

Have the kid. Wait a few years. Pay down your debts. Get a house when your kid has grown enough to actually run in all that space.

John Spartan

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Re: Down Payment vs Student Loans
« Reply #16 on: April 19, 2013, 04:05:23 AM »
Thanks for the advice everyone!  We're definitely going to hold off on the house and throw a chunk of our savings at the loans (probably 15k because I haven't actually started working yet and we'd like to keep some reserve funds).

But perhaps someone can answer the "root" of why I asked the question?  We were not looking to buy a giant McMansion with a huge yard and fence and all of the trimmings.  We live in Arlington VA right now (just outside of DC).  It's pretty expensive everywhere in this city, but we're in one of the cheaper 1 bedroom apts that I've seen.  We have 1 car which my wife uses to drive about 15 miles to work.  I bike or take public transit (mostly bike).  We are walking distance to several grocery stores and basically everything else we need.  However, our rent here (including utilities) is about $1600/month.  And that's about as good as I've seen in this area (while keeping transport for us both in mind). 

Anyway, in 14 months we'll be moving to a much cheaper city in Texas (and living rent free for up to a year).  Our thoughts were that in 2 years we could buy a modest house with a mortgage considerably less than $1600/month (maybe in the 900 - 1100 range) as opposed to renting after our year with her family.  My question is, how is that "worse" than renting?  Assuming monthly payments are relatively equal, between renting and owning, isn't it better to own?  I know that there are associated maintenance fees etc..., but I'm relatively handy.  And sure, there are property taxes etc... associated with owning (especially in Texas), but as a renter, I'll be paying for those anyway because the owner would just be pushing them off on me.  Understand, I'm talking hypothetically now.  We'll hold off on buying until the loans are in check...but how is owning worse in this situation?

Dmy0013 - So there's my rent.  I'm sure there are other cuts we could make here and there to get lower monthly expenses (our current best is $2900), but we've certainly come a long way from where we were before I started looking into not living like jackasses. 

jrs - Thanks so much for the numbers breakdown!  It seems fairly accurate to me (although I have an exact figure for the 10 year payoff on my student loans: $2086).  It's hard for me to forecast into the future to determine when we'll be debt free.  There are so many variables.  Even with my future salary of 100 - 120k, there's a lot of wiggle room.  Plus, there are a lot of "side jobs" I can do as a pharmacist that can boost that even further.  Also, even though my wife plans on taking a few years off of working, we've discussed providing daycare to our nephews once we're down there (providing their parents considerable savings over a normal day care place and giving us a little extra money).  Then she may go back to work once our future-kid is in school.  I'd like to get to debt free as soon as possible, but I have a hard time forecasting so far ahead with so many variables.  I'm still a relative noob at personal finance and in need of a lot more education :)

gdborton

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Re: Down Payment vs Student Loans
« Reply #17 on: April 19, 2013, 07:20:15 AM »
Quote
My question is, how is that "worse" than renting?

Opportunity cost of your down payment, hidden costs, closing costs, lack of mobility...  All of these things are more costly than you are probably considering. 

Quote
live with her family for a year rent free

You've got a great opportunity here to smash the ever-loving shit out of your loans.  People would kill for a guaranteed 7% return, stay for as long as they'll put up with you and push your loans to 0.

AJ

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Re: Down Payment vs Student Loans
« Reply #18 on: April 19, 2013, 10:40:39 AM »
My question is, how is that "worse" than renting?  Assuming monthly payments are relatively equal, between renting and owning, isn't it better to own? 

The type of place you will be willing to rent and the type of place you will want to buy are likely not going to be the same. When you buy a place, you have to look years down the road and think "how much space and what amenities will I need when our child is a toddler? an elementary student? a teen? if we have more kids?" But when you rent, you don't have to think about that because you can move if you outgrow the house. When you rent, you can live in a cheaper school district because you know you can always move when kindergarten comes. You can cram into a one bedroom apartment with no yard because an infant doesn't need their own room and can't use a yard anyway.

With your debt level, it would be wise to spend as little as you're able and pay down the loans until you actually need more space/amenities/privacy/etc. That doesn't mean they need to be paid off, but many new parents-to-be have made the mistake of thinking that future-baby = bigger house/car/etc. (Myself included - we bought our first house when we started trying to conceive. Turns out, it's harder to make a baby than we thought and we're on our third house now :/ Life is what happens when you're busy making other plans, I guess...)

Reepekg

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Re: Down Payment vs Student Loans
« Reply #19 on: April 19, 2013, 11:02:34 AM »
My question is, how is that "worse" than renting?  Assuming monthly payments are relatively equal, between renting and owning, isn't it better to own? 

The type of place you will be willing to rent and the type of place you will want to buy are likely not going to be the same.

This. If you compare with what you're paying now in VA or assume renting and buying will have the same monthly payment, then buying at $900/mo looks good. If you assume you might be able to get the Texan cousin of your Arlington apartment for like $500/mo, putting the monthly difference towards your loan for a few years might be the way to go.
« Last Edit: April 19, 2013, 11:07:52 AM by Reepekg »

ace1224

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Re: Down Payment vs Student Loans
« Reply #20 on: April 19, 2013, 11:04:29 AM »
My question is, how is that "worse" than renting?  Assuming monthly payments are relatively equal, between renting and owning, isn't it better to own? 

The type of place you will be willing to rent and the type of place you will want to buy are likely not going to be the same.

This. If you compare what you're paying now in VA or assume renting and buying will have the same monthly payment, then buying at $900/mo looks good. If you assume you might be able to get the Texan cousin of your Arlington apartment for like $500/mo, putting the monthly difference towards your loan for a few years might be the way to go.
this! student loans first, then down payment

Reepekg

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Re: Down Payment vs Student Loans
« Reply #21 on: April 19, 2013, 11:14:18 AM »
When we're saying you should rent, what we're really saying is to save a lot of money by saying "no" to lifestyle inflation for now while you can.

Mazzinator

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Re: Down Payment vs Student Loans
« Reply #22 on: April 19, 2013, 12:28:49 PM »
Quote
but many new parents-to-be have made the mistake of thinking that future-baby = bigger house/car/etc. (Myself included - we bought our first house when we started trying to conceive. Turns out, it's harder to make a baby than we thought and we're on our third house now :/ Life is what happens when you're busy making other plans, I guess...)

Exactly!!! Buy a house AFTER you see what toddlers/kids really need.

I did the similar baby=bigger (or better) I wouldn't even use "used" cloth diapers/clothes..like a poopy stain was going to harm my newborn..no, just wash it dumbass..

Kids don't need their own room, luxury strollers, bouncy seats, swings, moby wraps, co-sleepers, pack n plays, etc. I had 100 different things for my baby to sit in. Turns out, all he wanted was to be held, which was free ;-)

Anyways, point is, base your housing needs off of what you need now. Once jr arrives, and is old enough to need space to run around in, then look to changing it. If you buy a home it becomes a lot harder to move..

Also, I feel your pain. We are midway through SL debt. Got it down to $100k..and punching those fuckers in the face as hard as we can!!!

gooeydruid

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Re: Down Payment vs Student Loans
« Reply #23 on: April 19, 2013, 04:56:14 PM »
I feel your pain my friend. That amount of debt is crippling. I'm in a very similar situation to you.
I just left Georgetown in Washington DC after 3 years living there for graduate school, completed training as a CRNA in December.
I took a job as a CRNA in Oklahoma this year making $150,000+.
I have $150,000 in student loans at rates between 6.8 and 7.9%.
My wife and I are living with my parents until the early Fall. We're going to purchase an inexpensive house this fall, roughly $1400/mo. As the average rent here for a decent, safe neighborhood with a garage runs about $1100-$1400, I can't imagine paying that to someone else when it could go into my own equity. The market here definitely makes it hard to rent when owning is the same price.

I know quite a few on here won't agree with owning prior to paying off loans and I understand the economics of why, but its what the wife and I would like to do and we can afford it, with my monthly loan payments they'll be gone in 3-4 years tops.

The south has a much different housing market than DC. In DC it is near impossible to own your own home. In TX/OK housing is so cheap and rental rates are higher than I imagined they would be, owning a home is much easier.

John Spartan

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Re: Down Payment vs Student Loans
« Reply #24 on: April 22, 2013, 03:16:57 AM »
Thanks everyone!  I really appreciate all of your opinions.  We're going to pay 15k now, and try to be as aggressive as possible over the next 14 months.  Then we'll see where we are when we move to Texas, and how long our "welcome" lasts with the family.  I've gained a lot of perspective from you guys here on what was a tricky area for us...so again thank you.

racherinh

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Re: Down Payment vs Student Loans
« Reply #25 on: April 22, 2013, 04:46:34 AM »
It sounds like maybe you've gotten all the opinions you need, but as someone who started their family early (we now have three - 6, 3, and 1), has moved a lot with them all, and never lived in an apartment bigger than 800 sq ft - I just wanted to say that families can be very happy on far less space than is usually assumed in the US. Their normal is whatever they've always known. My second daughter would be horribly sad if we "made" her have her own room - she's never slept in a room by herself. Our oldest would like a little more privacy, but we're finding ways to provide that for her without having a bigger place. Our biggest difficulty is the lack of nearby parks, not the apartment size. Next year we'll live in our biggest place yet - 1100 sq ft, although still 2 bedrooms. All three girls will share, with the youngest probably napping in our room. We would never buy a house this small, but we're delighted to be renting it next year while we transition from graduate school to full-time, permanent work.

Living in Europe has showed us a very different normal - all the families we met in Rome live in 600-800 sq ft apartments, with one or two kids, and sometimes a grandparent. They are very space efficient and go to the park a lot. In Pisa it's easier to move to the edge of town and have three bedrooms, as the city is so tiny. I'm not saying everyone has to do this, and space is much cheaper in the US and Canada, but I find it helpful to know that families can be happy in a wide variety of situations.

Additionally, if there's anything your wife would consider doing as a side hustle from home, now might be a good time to explore it and ramp it up. I found that after the baby is 6 months or so, it was very easy to find 8-10 hours a week to work, and possible to find up to 20, on occasion. I've done a lot of temp work and research at various universities for income, as well as tutoring. It depends on what you both want, of course, but it's nice to have options. I love being home with my kids, and I love having some kind of work outlet, as well. It has also kept me employable in the long term, so I can still find full-time work when I want it (like next year, when my husband will probably stay home).

Best of luck!