Author Topic: Paying down loans, allocating assets, and preparing for buying a house.  (Read 1262 times)

Quaglar

  • 5 O'Clock Shadow
  • *
  • Posts: 9
  • Age: 29
Hey there folks. I had a few questions regarding what my next few steps should be in terms of preparing to purchase a home in ~3-6 years.

My wife and I are currently in Graduate School to become psychologists. She is planning on becoming a College Professor, whereas I will likely end up consulting for Industrial Organizational psychology related things.  Right now we are about to pay down my super low interest student loans ( ~2.7%). They are currently at 15k, but we are about to make a 10 k payment. Although I understand that we are missing out on market returns by choosing to do this, for both peace of mind and credit improving reasons we have chose this path. Once we finish paying this loan (hopefully within 7  months), however I am not sure where to start focusing in terms of investments. It is very likely that we will need to have a significant amount of money ready for a down payment, but the return on the lower risk forms of investing right now are pretty trash. 

Following student debt assassination, what would you recommend my wife and I do? When making recommendations keep the following in mind:
  • Although my wife has good credit, I basically do not have much of a credit history.
  • We have a 6 month emergency fund built up.
  • We are planning to buy a house in the St.Paul/Minneapolis area (should be ~300k), in the next 3 to 6 years.
  • We are very good savers, but we want to start building out our investment income.
  • We do not wanna be caught with our pants down due to market swings when it comes time to buy a house.
  • Our potential joint income is likely to be high, however we are limiting ourselves in terms of job opportunities because we want to be in the Twin Cities (friends and family) area, thus we want to have some degree of safety and not have to plan on eating chickens that have not yet hatched.
  • I don't want to feel like I am just letting my money rot away due to inflation, but I don't want to lack the liquid assets for a down payment
  • Moar credit plox


We would greatly appreciate any advice you wise mustachioed sages may have to offer, particularly in terms of asset allocation and credit building.

Aphalite

  • Bristles
  • ***
  • Posts: 425
Re: Paying down loans, allocating assets, and preparing for buying a house.
« Reply #1 on: January 26, 2015, 03:00:39 PM »
Just wanted to point out really quickly that early payment of debt does not do anything, good or bad, to your credit score. In fact, if that's the oldest debt that you have, it will actually lower your credit score as now you have lost the oldest record of you making regular payments on debt

wtjbatman

  • Handlebar Stache
  • *****
  • Posts: 1313
  • Age: 35
  • Location: Missouri
Re: Paying down loans, allocating assets, and preparing for buying a house.
« Reply #2 on: January 26, 2015, 03:02:08 PM »
I wouldn't pay down that student debt. I'd put that 10k towards the 60k down payment you are going to want for a house in a few years. If you and your wife need better credit history, simply crushing your student loans isn't going to be enough. You need to get a couple credit cards, obviously pay them off monthly. Maybe a low interest personal loan.

Put your house down payment money in a "high yield" online savings account. Yeah the yield stinks, but it's a much better outcome to lose 1-2% of the value of your money to inflation over a 3 year period than invest the money, the next crash comes in 2018, and the value of your down payment drops 40%.