Paying off Federal Student Loans vs. Private Student Loans vs. Down Payment on a House

[Stagemomma]

At 66K per year, I'm not sure why you aren't making double payments on that 6% loan each month. Or more. You can still put some of your monthly income into savings.

IMHO 15K isn't NEARLY enough for a down payment on a house. If you can't put down enough to avoid paying PMI, you don't have enough.

[Lafleur]

Originally Posted by Stagemomma

At 66K per year, I'm not sure why you aren't making double payments on that 6% loan each month. Or more. You can still put some of your monthly income into savings.

IMHO 15K isn't NEARLY enough for a down payment on a house. If you can't put down enough to avoid paying PMI, you don't have enough.

I have been doing this. I'm usually putting down well over double what I owe each month on the debt. Well, I should say that I will begin doing this again. For the past several months, I've been trying to build up my savings, which I had neglected in the past while I was paying off my car and student loans.

[bradykp]

Originally Posted by Malloric

Highest interest rate as always. If they were close, say 5.75% and 6%, sure, go for the variable interest rate.

I don't particularly look at houses as a capital growth investment. If you can buy something where the mortgage would be less than you spend on rent, I'd go for it. Cheap money means it's a good time to borrow. At the same time, if interest rates do go up that's going to put a lot of downward pressure on housing prices. But if you can buy a house for $1,200 and you're paying $1,500 in rent, who cares what the price of the house does assuming you're buying it to live in rather than as any investment.

i think this is 100% spot on.

and don't get too caught up on i-rate increasing. it will be a few years at least before the 2.75% catches up to the 6%, so clearly pay off higher rate debt first.

[bradykp]

Originally Posted by Lafleur

This plan (paying off the loans) would leave me with about 2k in the savings account. Do you think I should leave the existing savings there and just pay my loans with future net income?

i wouldnt touch your current savings. make extra payments on your 6% loan instead of socking more into savings, but leave that $15k there in case you change course or need it for an emergency.

[nybbler]

You haven't said what the prices of the houses you would be looking at would be. Paying PMI isn't the end of the world if you have the option to get rid of it by paying additional principal later (some loans you can do this, some you can't).

I think making $66K you should be doing pretty well and be able to buy a house even given the student debt, provided your job is stable and you don't plan on leaving the area, and are otherwise financially responsible. But the big wildcard here is the girlfriend I assume you're serious about... are you thinking she'll be moving in with you? Or is this just a theoretical GF borne out of frustration?

[ncole1]

Originally Posted by Lafleur

I didn't say that I have to buy a house right now. I'm just saying that the expectation here is that I'm somehow supposed to have 20% down saved if I want to buy a house as a first time buyer. Around here, that's at least $40k. That being the case, I probably will never be able to buy a home, because by the time I'll have that saved up, I'll probably be close to 40 and who finances a house until their 70s?

Then cut your spending or increase your income and get to $40k sooner.

Or get a 15-year home loan.

Originally Posted by Lafleur

Not specifically anyone here, but it's a rule of thumb that I've heard several times from people. Apparently women won't consider marrying you unless you spend X amount on their engagement ring.

Or so I'm told.

There's a lot of variation on this. First you need a good mutual understanding of each other; if you really cannot afford to spend that much, a loving spouse-to-be will accommodate. If you can, then you may have to sacrifice something else. Do you seriously expect to get everything you want all the time? Are you unwilling to give up something else for the love of your life?

Originally Posted by Lafleur

I'd still be paying about the same that I'm paying now. Denver Metro has become a high COL area, but it's where I live and it's where I work, so I don't have much of a choice at the moment.

I pay around $825 for a crappy 1-BR now in a less-than-desirable part of town. Most 2-BRs I've seen are around $1500-$1600/month in rent alone.

Then rent a room in a house. I'm sure if you look around you can find something for $500-$600/mo. easily on Craigslist. I do it in a much higher cost area than you live in, trust me on this one.

Originally Posted by Lafleur

Yes, and those people don't have a dime of savings either. Trust me, I know many of them personally.

Doesn't matter. If they make half your income and have a social life, then you can spend the same amount they do, have a social life, and have lots of savings too. It's really simple math...