Money Matters
anchalmasako
member
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Homeowners with Student Loan?
Forgive me if this has been asked a millions times, as I don't lurk here too often...
If you own a home, and have a student loan, how have you managed paying for both? What did you prioritize with regard to the student loan and home savings before, and after, you bought your home? Is it terrible to buy a home while carrying student loan debt, even if the student loan debt is your only debt? Other thoughts?
Thank you 
daughter born June 2011 via C-Section, son born November 2012 via VBAC
Re: Homeowners with Student Loan?
Honestly, I think the simplest answer to this is you budget before you buy your home. If you have a $500 loan payment every month, you probably don't want to buy that 300K house with a huge house payment because then you will have no money left over for anything else. Even though a lender will loan you the money based on your income, they don't look at what your payments are going to be, and how that is going to add with your student loan payments.
I would suggest getting on a written budget and figuring how much you would be comfortable spending each month on a house payment (mortgage, insurance, taxes and everything included) before you fall in love with a house. Once you know what you want to spend, then you can use a mortgage calculator to figure out how much house you can afford (but don't forget about insurance and taxes mortgage calculators often don't include that). Try to get a 15 year loan if possible, you will save yourself tens of thousands, if not hundreds of thousands in interest during the 15 year period over a traditional 30 year mortgage.
I would also look ahead at closing costs, you want to still have an emergency fund in place after you purchase your house, otherwise whatever can go wrong probably will, and you may regret your purchase.
I hope that helps a bit. I love house hunting- it's exciting. One of my friends is doing that right now!
I bought a house almost 2 years ago and I also have student loan debt. When qualifying for the loan on my house they run a debt to income calculation which included the student loans. Although I was qualified for a bigger mortgage payment, I opted to look at homes under that budget so I could easily afford both my student loans and mortgage payment.
Are you paying rent now? Are you comfortable with your rent payments and your student loan payments? If so, then I would suggest keeping any mortgage payment as close to your rent payment as possible.
To my knowledge, this hasn't been asked before. Or at least not for a long while. It's a good question.
It isn't bad to buy a home with student loan debt. But the caveat to that answer is your budget and what it says you can afford mathematically.
You need to write down your monthly income after taxes and health insurance or other benefits are taken out. This is your take-home pay.
Then, you need to figure out your monthly expenses. You will include things likecell phones, Internet, TV, other insurance policies, CCs, utilities, and the SLs, plus thigns like gas, food, "fun money," etc.
The general rule these days is to have no more than 25-28% of your take home income each month go towards your housing payment (be that rent or mortgage). And, this 25-28% should include the payment, plus any insurance (renters or homeowners), any property taxes (if its a mortgage) and also the utilities for the property (water, sewer, trash, gas, electric).
If you do not know an average utility cost for an average home in your area, many times the utility companies have some sort of chart or calculator on their websites so you can learn more about what your costs may be. If you use these tools, my opinion would be to budget a bit high with them.
Once you know your budget this will help you in your home search to know which homes are in your price range.
The other caveat is your DP. Most posters here think some type of DP is important. For more info on that you can scroll through posts from within the past 1-2 weeks. I think there are a few about DPs.
A book to read is Home Buying for Dummies.
I have a (to my regret) fairly large student loan payment each month and we also own a home. The bank will take that loan payment into account when they calculate how much they will give you.
In my case, my DH and I budgeted for the loan amount, plus the extra which I pay on it each month as well. We tried to budget high for our other expenses, and budgeted for fun money each month as well. Once we had a good idea of what we had leftover after that, we set a max housing budget. We are not struggling and we are continuing to build up savings (which was depleted from buying furniture, etc.)
Honestly what helps us is that DH and I both have good jobs and DH had no student loan debt. I don't know that we would have a house, or at least not as nice a one as we do have, if he did have loans. We also have no car loans or credit card debt. Living with student loans just takes more careful financial planning. For example, DH is going to "need" a new car in a year or two. I am working it so that the amount I have paid down on my loans with the extra I put on each month will equal out or be more than the amount of the new car payment. In the meantime, we are also saving up the down payment to make that payment lower as well.
I've wondered this, too, but have an additional question. Hope you don't mind my jumping in.
Let's say you have a student loan that is, say, $30K, and you're putting a $50K down payment on a home, does it look bad? I mean, I've heard people say if you have $50K for a home you should pay off the $30K loan and only put $20K down. But let's say the student loan payment is really low and manageable. It wouldn't affect the person affording a home payment. Then wouldn't it make more sense to put the higher amount down on the home to avoid PMI?
I am by no means an expert, but here are my feelings on this: if $50k is 20% and you can manage your student loan payment plus mortgage, etc., I'd put the $50k down. However, if $50k is more than 20%, I would crunch some numbers and see if you can't save some money overall by putting less down. So say the house is $200k, so 20% is $40k. You can find both mortgage and SL calculators online; see what they say the total cost for each loan would be if you put all $50k toward the house, then try 45k/5k, 40k/10k, and some numbers in between. You should be able to see what your optimal down payment is this way.
"You know you're in love when you don't want to fall asleep because reality is finally better than your dreams." - Dr. Seuss
"You know you're in love when you don't want to fall asleep because reality is finally better than your dreams." - Dr. SeussThanks everyone for your responses! They are helpful. My student loan is only $15K, but we really want to buy a house ASAP because rent here is almost 2x as much as a mortgage payment is, so it's just throwing lots of money away. If that weren't the case, I'd just knock out the student loan first since it's "only" $15K, but I think it makes more financial sense for us to pay half of our rent amount by purchasing a house ASAP. But I'll continue to ponder this matter as we finish saving a down payment.....