Buying A Home
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Feeling a little blind-sided
FI and I just put down our earnest money on a house and completed our mortgage application yesterday. Our lender just emailed us asking for clarification on FI's student loans - when the payments would start, how much they would cost, etc. Apparently they are going to be over $400/month and he starts getting charged in June. The month after we are supposed to close. Now, I knew FI had student loans and we had talked a lot about defering them (which I don't think he tried hard enough to do) but this was a huge shock to me. I had NO idea we needed to budget an extra $400+/month right after we buy our house. Not only am I pissed at FI for not telling me sooner, but now I'm seriously worried we might not get approved for our loan. =( Thoughts? Advice? Suggestions?
Re: Feeling a little blind-sided
That is a lot of extra money a month, and to be honest unless you bought way below what you could "afford" it probably will affect your approval. I would set up an appointment with the mortgage folks ASAP and discuss. Ask them how much time you'd be able to have to try and get them deferred if it will kill the deal and see what you can do.
Also, you need to sit down with your FI and have a come to Jesus talk. He needs to tell you about any other outstanding debts he has, how much they amount to, etc.
I totally agree with PP. You also need to re-budget and decide if that extra $400 a month along with a house payment is going to be doable for you. I know when we were pre-approved our approval came about close to $100k more than we spent because when I did our budget and account for all the little extras like being able to put something into savings, day care cost, etc there was no way we could afford what they approved us for.
I know the lender will account for this expense in your debt to income ratio but try and think of all the little extras you will have to cover that they won't account for.
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It's totally understandable to be upset. Have you done the budget? What would he have to get it lowered down to in order for you to get the house? And if he did get it lowered, how long does that lower payment last? The worst thing would be to get it lowered only long enough for you to get the house and then have the payments shot back up.
Another thought might be if you have a money that you planned to use for a down payment, could you use part of that to pay off part of a student loan? A smaller principal on the student loan might help as well but remember that will likely raise your mortgage.
It will all work out though. I know its hard now.
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Your FI absolutely should have told you about these before now. That is crazy. I'm assuming you did a budget together to determine how much you could afford, and if he didn't mention it then, that to me is a lie by omission. And he had to know that it was coming. Believe me, they have to do exit counseling and he knew.
I don't like talking about my student loans, but my H knows the totals and how much I pay a month. He knew that before we combined finances and before we were married.
I will stick up for your FI on ONE point only: if he tried to pursue an economic deferrment, they are extremely hard to get right now. Because so many people graduated with no job on the horizon and were applying for this, they raised the standards.
Have him look into consolidation-there is a federal program right now that lets you consolidate certain loans to lower the interest rate.
I haven't sat down and done the math yet but I am just freaking out because I pay 70% of our bills and I just feel like more of a burden is being placed on me now. I know I shouldn't feel this way because it's our money, our bills, we're a team....But when I'm making most of the money it just sucks even more to learn about a $400/month bill out of left field. I am able to save about $750 a month comfortably right now so technically we should be able to pay the $400/month but then I barely have anything to put in savings.
I am hopeful we will still be approved for our loan but FI is emailing our lender right now to set up a time to talk about this. It's a good idea about using some of our down payment for the loans, but I don't think we can put enough of a dent on his massive amount of loans for it to really matter. And I'm not sure how long lowered payments would last. So frustrated right now.
Thanks for the advice, I'll have him look into consolidation.
As far as the loans go, (and not to defend him in anyway) he really may not have been expecting a $400 a month payment, during exit counseling now they don't give you a breakdown of what your payments are they just tell you what you owe, and without a proper breakdown it can be hard to tell exactly what you are going to have to pay monthly.
So a few questions/suggestions for you - contact his lenders, or find a friendly financial planning person at the school and see if they can give you estimates for monthly payments on standard repayment, extended repayment, and consolidation. Is the $400 a month on the standard plan, and if so how many years does the standard plan run for? Also, if you know his interest rates, go to finaid.org and see if you can use the financial aid calculators to determine payments on a longer-term repayment plan.
Finally, he is obviously graduating and the payments are coming due, does he have a job yet? And when he does get one is his projected salary enough to cover the loan and contribute towards the house and bills? Or did you already take into consideration his income in figuring your monthly mortgage payment?
You mean blind-sided?
A few thoughts, in no particular order:
1. Better to find out now than after you're in contract, or worse, after closing! Deal with figuring this out aggressively. Don't let love of a house pull you into a bad decision. If you can't get approved for the mortgage with his SLs, that means you can't afford it. Save yourself the heartache and credit thrasing of buying it and losing it. Don't push buying it if you can't really afford it.
2. Why would you want him to defer his SLs? He's going to have to pay them sooner or later, and they'll just keep growing with accruing interest while in deferment. Deferment is like stuffing them under a rug and hoping they disappear. They won't.
3. Along those lines, maybe you need to reevaluate what your house budget should look like. Unless he has really low interest rates (down in the 2-4% interest rate zone, which we haven't seen on SLs in several years), you're not better off putting them onto 25-30 year extended pay plans. You're better off tackling them head on. If $400/mo. is the payment, then that's what it is. You'll need to budget around it, and maybe choose a less expensive house. I'm sure that sucks, if it wasn't something you realized you'd need to do. I can't imagine. (Calvin and I have a couple hundred grand in SLs from law school, but we knew what we were signing up for.) But that doesn't change the fact that now that you know, you need to deal with it.
4. Sounds like it's time, if you're buying a house together (or trying to), that you have a real, full disclosure money talk. Have you yet? If not, stop what you're doing and do it this weekend.
I have no idea if it's the standard plan. I've been kept in the dark about a lot of this. All I know at this point is he has 3 loans which total about $60K. He graduated last May. He has a full-time job. He pays 30% of the bills. I already took his income into consideration.
Ditto this.
And I love how you call your H Calvin. I just knew Calvin would give in to Susie someday.
Please tell me you have a cat named Hobbes... even if he only exists on the interwebs.
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Oops, yes I do. I fail.
1. I agree
2. I guess since I don't have any student loans, I don't really know how they work. I was fortunate enough to have my parents pay for my education in full. I just thought deferring was easier for some reason.
3. I'm not sure what his interest rates are, but I will find out. And yes, it's better to get these paid off sooner than later.
4. I've been nagging him about having this talk for months. Just to avoid something like this. We're doing it ASAP.
There, I fixed that for you.
This is not a talk that you postpone. You have it. Now. You do not want to tie yourself to hidden debt. Once you get married or tie yourself together financially in any way (buying a house will tie you together financially) what's yours is his and what's his is yours. That means the good and the bad.
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If he is working and you all can afford to buy a house I think deferring is a horrible idea. Existing financial obligations should be a priority over new ones you might incur, even though I understand wanting to be able to buy a house.
I also agree with the person who said they chose not to buy anywhere close to the max they were approved for b.c. of other financial obligations. We got approved for some insane amount that maybe we could have swung but would have been completely irresponsible to take on.
How much does he work? What does he do? I took a second job waiting tables on Saturday nights so that we could comfortably afford to fix some things up in the house ASAP. It sounds like you may want to look at less expensive houses or he may need to get a second part time job. Also, maybe I come from lala land but $400 a month $60 k total sounds perfectly reasonable to me for student loans these days.
Do you have a new house budget? Will you mortgage/taxes/insurance/etc be comparable to what you are paying now? If so...
Having only $350 left over at the end of the month is no fun. One major repair could eat up all of your extra money for the whole year, or more. I'd be really worried about having so little left over. If the loan doesn't go through now, I think it's probably a blessing and you guys can try again after you're bringing in more money every month.
Low housing prices and interest rates are not likely going anywhere, any time soon. A house is not something to rush into unless you are 100% prepared.
I agree, have H. consolidate. Also, not sure if you two filed taxes separately or how much he makes... but you may want to try applying for IBR (Income Based Repayment). It's worth talking his lenders about right away, because it takes about 15 or so days to get everything worked out (if you stay on top of them).
Lenders are almost always willing to work with you, as long as you are honestly trying to figure out a way to pay them back within your means.
Good luck!
Hon, this, combined with his non-disclosure, is a giant red flag to me. I would seriously, seriously have a come to Jesus meeting with yourself about whether you want to be tied for the rest of your life to someone who lies to you and to someone who is your polar personality opposite. Take a step back and see where you are now while you're still engaged. If it's hard now, it is NEVER going to get easier between the two of you.
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I married my opposite (also a procrastinator). I don't nag, since he gets it done, just in his own time. Now, it would be another story if he didn't get things done! We just agree ahead of time what I'm going to do, what he's going to do, and what we're going to hire out.
We did go to pre-marital counseling (required by our church) and hashed a ton of this stuff out. I think that's really important for opposites who marry.
My personal opinion -- I wouldn't buy a house in your situation, just because you haven't actually lived on the budget you'll be on when his SLs come due.
Also -- I love handling the finances, so I do it 100%. I have all his SL info, our accounts are merged, etc. I actually took over before we even got married. H isn't bad with money, but it's really, really important to me to save money and all that. You sound the same way. I think you need the full picture, and maybe full responsibility of all the finances, if your relationship is open to that. You might feel better if you have the control. Regardless, you definitely need to know everything.
Great news! Glad everything worked out for you, good luck with your house!
I'm glad you were able to work things out, but the $200/mo reduction sounds like it only lasts for 1 year. What is the plan once the payments shoot back up to $400/mo the next year? Like PP said, student loans are not just going to go away.
We aren't sure what they will be after a year. The reduction plan he applied for expires every year so we will have to reapply each year.
The reduction plan is great for right now, but like PPs have said, the loans won't just go away, and those reduced payment plans can make the length of the loan repayment longer. Your payment after the 1 year reduced payment will likely be around $400, or just slightly below, since the majority of that $200 payment will go towards interest in the beginning, and not make much of a dent at all in the principal balance.
I did reduced payments for 3 years after graduation because my first job didn't pay much (this was much before we purchased a house though). My payments on the standard plan would've been $250/month; I had it reduced to $200. After the 3 years my payment was/is $235/month, not much different than if I'd gone with the standard in the first place, although I did bring my income up during those 3 years. I don't think I'd be comfortable buying a house until I had some time to experience things with my true budget though; I went back to regular payments about 1.5 years before we purchased our house, so we knew what our budget would truly be.
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Unless our income changes dramatically for the better, then the payments will not go up much past $200. And if our income DOES change dramatically for the better then we're not so much in a pickle anymore. I get it. The student loans have to be paid. Time to stop beating a dead horse.