My situation:
I recently landed a salaried job starting at 35k a year. I'm currently living at home so I have no bills but a cell phone bill really.

I have a student loan of about 10k I need to pay off but with the current housing market, i'd love to get out the parents house but I would miss saving all this money while living at home. I also thought about buying a nice car to drive then sell it to buy a house later on.

Not sure what I should get busy doing first.

12/15/2008 2:48:46 AM

Get outta debt asap.

Trying to put furniture in a new house is an expensive process.

Also, Im not sure what kind of house youre going to qualify for making 35k a year. You MIGHT qualify for a condo, at most a townhouse.

Find a rich girlfriend, marry, then buy a house.

12/15/2008 3:00:58 AM

Pay off that debt asap, then move out. The economy wont be booming in 9 months.

12/15/2008 3:12:35 AM

more info is needed.
if the loan is at a really low rate, it might not be worth paying off early since the interest is tax deductible.
at the same time, 35K is a good salary but will not get you a very large pre-approval.

So really, i'd go talk to a bank and see what they pre-approve you for, and see if you actually can like living in a place like that (ie can you get a good place or is is going to be bad). Most first-time mortgages are gone now, aka you need to have 10-20% down, and having bought a house, there are TONS of 'little' things (paint, furniture, moving, stocking the fridge, BUYING a fridge even) that come up too.

12/15/2008 3:14:56 AM

The loan:

It's a Fed Student Aid loan. I owe exactly: $14,500.00 at a 6.8% interest rate.

The house:

I agree with outfitting the house w/ furniture, etc will be expensive. The girl im currently dating is making pretty good money as well. We even played around with a "married" budget the other day but it'll be awhile before anything like that happens.

I'll get this loan taken care of I do believe.

[Edited on December 15, 2008 at 3:26 AM. Reason : ss]

12/15/2008 3:25:36 AM

Quote :

"35K is a good salary"

Where at, South Africa? Mexico?

[Edited on December 15, 2008 at 3:33 AM. Reason : .]

12/15/2008 3:33:49 AM

as long as its free and your girl don't care - do not move out of your parents house

35k ain't what it used to be

12/15/2008 3:36:38 AM

I recommend for most of my frat bros who just graduated to move back home, pay the rents a few hundy a month, and live there for a year or two (barring you dont have a gf, or she dont care)

12/15/2008 4:52:46 AM

I also have this problem. I'll be graduating in about 6 months. I'll have about 50K at around 5% interest in student loan, and I'll be making around 110K. Should I just go ahead and pay off my student loan or should I save the money to buy a house instead?

12/15/2008 5:17:14 AM

The Democrats are going to make it a priority to reduce the interest rate on student loan repayment. It might be prudent to pay it down once that passes.

12/15/2008 5:54:35 AM

Pay the loan! you have to do it anyway. When its paid off keep making that payment to yourself and watch the $$ stack up. Then you have a nice down payment for a house, car, mailorder bride, whatever.

12/15/2008 7:47:38 AM

I've heard when renting/living with your parents etc, to pay yourself the difference in rent paid now vs the mortgage you'd be comfortable with into a money market or even revolving CDs. Then you're saving for down payment/house expenses. Also, go ahead and fully fund your 401k, or if not eligible yet, open and fully fund an IRA. If you're living at home for free, then you can do this and still pay extra on the student loans.

12/15/2008 7:59:53 AM

6.8% seems really, really high for a student loan.....

how long have you been out of school? How many loans do you have? Can you consolidate them?
I had about 4 loand totalling ~10k when I graduated (in 2003). I used a service, not sure from who - CFI i think - to consolidate them, and got a 2.0% rate on them. Then I set up autopay and they dropped it to 1.75%, then after two years of not missing a payment they dropped it to 1.5%. I'm paying that shit off as slowly as possible.

so, yeah - i would work oin getting a lower rate

12/15/2008 8:11:46 AM

if you have that opportunity to live at home i'd look at paying the loan off and just start/keep setting aside a little money each month towards an eventual down payment down the line.

Myself? I have 25k left in student loans at about 5.5% , with a 65 salary. I'm planning to just keep paying the student loans monthly like I do now with my automatic draft of $350 and just kind of "forget" about them and let them run their course because I want to get a house next year when I get married. I'm at 20% in my 401k and putting $500 a month into savings (with most of it planned to go towards a house down payment).

I wish I didn't have the student loans but my interest rate isnt bad and it is dropping over time. I forget what it will settle at but its pretty good.

12/15/2008 8:15:12 AM

if the garage threads are any indication, it doesnt matter what we tell you, you are going to do whatever you want

12/15/2008 8:24:38 AM

payoff the loan only because 6.8 is hella high.

12/15/2008 9:43:41 AM

Is it better to consolidate asap after you graduate or wait until your grace period is over?

12/15/2008 10:03:26 AM

milk the free rent and food at your parent's as long as possible

12/15/2008 10:07:19 AM

^^go ahead and find out what rate you can get for consolidation. probably no point in waiting for the grace period

12/15/2008 10:46:41 AM

how much do you have saved? if it's something close to $0 it's probably better to wait it out at your parents a little longer if they'll let you

12/15/2008 10:48:49 AM

Quote :

"$14,500.00 at a 6.8% interest rate."

Pay off that loan. That's a pretty high interest rate. Right now your income to debt ratio isn't looking too great. It's not bad, but it could certainly be better. If you buy a car there is no way they'll qualify you for a house. You can probably afford to pay that off in less than 2 years as long as you can stay at your parent's house that long.

After that buy a house while your income to debt ratio is $35,000 to $0. Spend a few months getting used to the bills and buying the things you need before you pick up that car loan.

If you have to buy a car in the next couple of years make it something reasonable. $8k will get you something that will last for years if you take care of it.

[Edited on December 15, 2008 at 10:56 AM. Reason : l]

12/15/2008 10:54:43 AM

Pay off that loan. Don't worry about buying a house - in a few years, they will still be just as affordable.

12/15/2008 11:06:32 AM

Quote :

"I also thought about buying a nice car to drive then sell it to buy a house later on."

that statement... it scares me. you are suggesting buying a car, then selling it so you can buy a house with the money? unless you NEED a car, or just really really want a car, do not buy one. if you are going to save up to buy a house, buying/selling a car is NOT going to allow you to save more money.

i'm not trying to knock on your salary, but unless you are going to have roommates it's going to be really hard to get by with 35k.

12/15/2008 11:08:00 AM

#1 is to pay off whatever debt you have.

12/15/2008 11:10:21 AM

pay off the loan so it is off your credit, then you will be able to get a better interest rate on said house or car.

and just so you know, $35k will go real quick when you tack on a mortgage payment and a car payment. i mean REAL quick.

[Edited on December 15, 2008 at 11:14 AM. Reason : a]

12/15/2008 11:12:57 AM

lol a 6.8% interest rate is NOT high

stretch that 10,000 over 20 years and you won't even NOTICE your monthly loan payments--that's like $10 a week while ignoring inflation

[Edited on December 15, 2008 at 12:24 PM. Reason : .]

12/15/2008 12:23:13 PM

6.8% is relatively high for a student loan. Not necessarily bad for a home or car loan, historically at least.

Even so, over 10-20 years, you're still paying $75-125/mo

12/15/2008 12:28:00 PM

wholly paying off $10k in student loans at this point in your life is a huge mistake

don't do it

12/15/2008 12:36:19 PM

^ that, i completely agree with.

All this talk about "get out of debt before _____" shouldn't apply to student loans.
If you're carrying $5k on a credit card at 19% or 29% (not uncommon rates), pay that shit off ASAP.

But student loans at decent rates are meant to be paid back over the long term. That said, I would still go through http://www.cfnc.org/ or someone to try to lower the rate as much as you can.


-----

ah shit, this sucks
http://www.cfnc.org/paying/loan/info_consolidation.jsp

Quote :

"Due to current financial market conditions and the high demand for student and parent loans for this current academic year, College Foundation, Inc. (CFI) reluctantly must suspend our Federal Consolidation Loan Program until further notice. If you are trying to lower your current monthly payment on your CFI loans, there may be other alternatives available such as requesting an extended or graduated repayment schedule. For more information on this option, please call 800-722-2838. Unfortunately, many private lenders have already suspended their Consolidation Loan Programs due to credit market deterioration and other factors. If you want to consolidate immediately, you may be eligible for a Federal Direct Consolidation Loan with the U.S. Department of Education. Please call the Federal Student Aid Direct Loan Consolidation Center at 1-800-557-7392 or go to its website at loanconsolidation.ed.gov."

try http://loanconsolidation.ed.gov/ i guess

[Edited on December 15, 2008 at 12:52 PM. Reason : .]

12/15/2008 12:50:32 PM

I guess some of y'all haven't taken out student loans recently. They raised the rates in 2006.

* The interest rate on Stafford loans first disbursed beginning July 1, 2006 is fixed at 6.8%.

* Subsidized Stafford loans for graduate and professional student and all unsubsidized Stafford loans is 6.8%.

* Subsidized Stafford loans for undergraduate students has a declining fixed interest rate.
          o July 1, 2008–June 30, 2009 the interest rate is 6%.
          o July 1, 2009–June 30, 2010 the interest rate is 5.6%.
          o July 1, 2010–June 30, 2011 the interest rate is 4.5%.
          o July 1, 2011–June 30, 2012 the interest rate is 3.4%.
          o Beginning July 1, 2012 the rate is 6.8%.

12/15/2008 2:07:55 PM

Pro-tip: When it debt, don't go out of your way to increase the amount of debt you're in.

12/15/2008 2:19:21 PM

^I agree

Pay off your student loans while you dont have any other expenses. You should knock that out very quickly.

You also need to build up some savings before you consider buying a house.

I would probably want to rent a small place or get a roommate before living at home for an extended period of time. But thats just me, I lean towards independent.

12/15/2008 2:49:37 PM

yea but if you are renting a small place for like $700 that could be a mortgage payment on a small condo, too. so wouldn't it be better to put the money towards something that builds equity than like go rent some place while you pay it off?? or just stay at home. but i mean renting just seems dumb, too IF you could purchase a place with a similar mort. payment.

also cars aren't good debt (if you would be doing car payments, which it seems like you would). new cars are REALLY horrible debt. i would go for a house/townhouse before a new car any day (regardless of the loan thing)

p.s. what kind of job did you just get? because even though a lot of lenders are doing away with consolidation right now, there are some other good programs taking effect in summer 09 for repayment, depending on what type of job you're in.

[Edited on December 15, 2008 at 3:02 PM. Reason : .]

12/15/2008 3:00:43 PM

Quote :

"yea but if you are renting a small place for like $700 that could be a mortgage payment on a small condo, too. so wouldn't it be better to put the money towards something that builds equity than like go rent some place while you pay it off?? or just stay at home. but i mean renting just seems dumb, too IF you could purchase a place with a similar mort. payment."

ding ding ding

12/15/2008 3:03:51 PM

Quote :

"lol a 6.8% interest rate is NOT high"

yes it is. My student loan is 4.5%

12/15/2008 3:11:11 PM

that's cause you are an old man, man

12/15/2008 3:13:12 PM

yeah, mine is 3.0 but with rates dropping like they have been CFI has been charging 2.5% for the past year or so.

12/15/2008 3:13:52 PM

^^ very true. I guess things were a lot different in 1996

12/15/2008 3:18:14 PM

Skack:

You stated earlier that he might have problems qualifying for a house with 14,500 in debt and a 35k salary? I have 25k in student loans and 65k income as stated earlier and from the people I have talked to casually (my fiance's parents are both CPAs and her mom is a CPA and a real estate agent) they seemed to think I would have no problem qualifying for a good house loan anyways. My credit score is sitting right at 800 averaged over the sites that annual credit report uses.

What is your take on this? I understand the debt to credit ratio is important, but that should already be reflected in my true credit score correct?

[Edited on December 15, 2008 at 3:27 PM. Reason : ]

12/15/2008 3:24:37 PM

Quote :

"I have a student loan of about 10k I need to pay off but with the current housing market, i'd love to get out the parents house but I would miss saving all this money while living at home. I also thought about buying a nice car to drive then sell it to buy a house later on."

first: if this "I also thought about buying a nice car to drive then sell it to buy a house later on" made sense to you then you are not ready to move out of your parents house.

second: owning a house is a good investment BUT there are a lot of hidden expensive right up front that you probably aren't aware of...to name a few...
down payment
closing costs
furniture
HOA dues
Home owners insurance (if you don't have it paid through your mortgage)
property tax
a car to get from your house to work

12/15/2008 3:26:36 PM

payoff the loan, then save for the house.
It will still be a buyer's market from the looks of things and you want
to make sure you can put down 20% on a standard mortgage.
Don't buy into that ARM crap. Look at what is happening to those guys now.
also don't go nuts on a car.
For one thing, if you are just starting a job you don't know if it's

1: a good place to work. Your boss and co-workers could turn out to real dicks.
2: a job that last through the recession

In other words, don't paint yourself into a corner that you will be stuck in.

12/15/2008 3:43:39 PM

do not pay off your loan, or else you're going to spend 3 years getting that $10,000 back in savings. that's 3 years you could have owned a home

in either event it's a lot harder to get 20% when you spend $10,000 on something else..

[Edited on December 15, 2008 at 3:46 PM. Reason : .]

12/15/2008 3:46:07 PM

Quote :

"You stated earlier that he might have problems qualifying for a house with 14,500 in debt and a 35k salary? .... I understand the debt to credit ratio is important, but that should already be reflected in my true credit score correct?"

i'm tellin' ya, student loans are viewed very differently than other debt, especially credit cards. Financiers know that people come out of school with 10's of K of debt and expect this. They also know that student loans are low risk and will have a fixed rate for years to come.



I'm with Crede 100% on this. Make your monthly payments on the loan, but don't go out of the way to pay it off quickly. Don't put your life on hold just to pay this stupid loan.
If you get a higher paying job in the future, or come across a windfall of several thousand dollars in the next couple years, the sure - consider taking some chunks out of the loan, $1-2K at a time. But otherwise, just set up an autodebit for your payments every month and just get used to it as a monthly expense. Save money, get a house when/if you can afford it, and just forget about this loan. After a few years of auto-debits and maybe a couple larger payoffs, it will be gone. But don't let this get in the way of moving on with your life.

12/15/2008 3:54:43 PM

Quote :

"Quote : "yea but if you are renting a small place for like $700 that could be a mortgage payment on a small condo, too. so wouldn't it be better to put the money towards something that builds equity than like go rent some place while you pay it off?? or just stay at home. but i mean renting just seems dumb, too IF you could purchase a place with a similar mort. payment." ding ding ding "

You arent thinking it through and its far from ding ding ding. You need to have some savings before you even consider buying a home. RsXtypeS posted some added expenses that homeownership brings and he didnt even mention if something breaks in the house. It can get expensive VERY quickly. Homeownership should NOT be for people with no savings and a ton of debt. Stop looking at homes as investments, this is what many people who are now bankrupt did. You can buy a home when its right for you. If you are stressed over a 10k debt how will you feel if you buy a home and it loses its value and/or you have to put in a new air conditioner.. etc?

Listen to some of the older guys on here on this one.

12/15/2008 4:52:24 PM

if you're planning on living in your home for, what is it, 8 years or more? it's smarter to own then rent. you should not buy a home unless you put down 20%, that's for sure

12/15/2008 4:57:13 PM

Quote :

"RsXtypeS posted some added expenses that homeownership brings and he didnt even mention if something breaks in the house."

didn't want to scare him too bad haha...but i was just listing what he'll be paying for upfront and monthly for the rest of his home owning life.

12/15/2008 5:08:14 PM

yeah, if you don't think you'll spend more than $700 a month check out the home ownership woes thread.

you're also forgetting homeowner's insurance, property taxes, utilities that you have to pay for all by yourself. and that assumes nothing breaks. something always breaks. when you rent, you call the landlord. when you buy, you get out your credit card.

i'm about to drop $1700+ on property taxes. even if you escrow you still have to pay that every year.

there's nothing "ding ding ding" about owning a house.

12/15/2008 5:13:57 PM

my first reaction is to save up for a house (+20% down pmt if possible), and then pay down the 6.8% student loan as much as you can.

also,

Quote :

"as long as its free and your girl don't care - do not move out of your parents house"

agreed, but even then, kick some cash upstairs by paying for utilities or other stuff just so they know you're contributing something. my parents wouldn't let me when i was freeloading off of them a few years back, so i bought them a Lex this year.

don't get a new car unless you need one. if you need one, there are right now and will be at the start of the year, some killer deals going on on account of the bad economy. make sure you shop like hell on Autotrader.com and talk to a lot of dealers about special promos if you're getting something.

12/15/2008 5:18:03 PM

autotrader is hit or miss...more misses than hits.

try craigslist.

and don't spend more than about $5000-6000 or so on a car until you get your finances into place a little more.

Personally, if you can stomach living at home (I couldn't, but that's just me), do it and save the money. The interest rate on those student loans is high enough to justify (to me) paying them off faster than the minimum, but you don't need to go totally berserk and put everything else on the back burner.

I would do this (and you prob won't have enough money to do all of it...I'm listing in priority order)

1. Cash savings until you have a few months of living expenses put away
2. 401k to the max extent that your employer offers a match
3. Max out Roth IRA (we can talk about what to put in it later/in another thread)
4. Pay down student loans, but not so much that you totally inhibit...
5. Continuing to add cash to your emergency fund, which will eventually go towards a house DP.


Yes, it's a good time to buy a house, but not if you're just starting your first "real" job making $35k/year. Get a big chunk of cash put away (say 10% DP plus a few months of living expenses. 20% is better, but that would take a lot longer), invest for retirement (at least to the level of maxing a Roth IRA and doing the 401k to the extent of any matching), and THEN you can worry about a house.

If it hasn't occured to you yet, it's going to take a little while, and it might involve renting some place with a roommate or two in the interim. I mean, I'm almost 30, make over double what you're making, have a full year's salary put away in cash and a bunch more in investments, no debt of any kind, and I'm planning on renting a room in a friend's house when I get back from Iraq. Don't be in such a hurry--you don't need to buy a house yet. It will only financially cripple you at this stage in the game.

[Edited on December 15, 2008 at 5:48 PM. Reason : in other words, "D"...none of the above. Save cash and buy stocks (in mutual/index funds)]

12/15/2008 5:44:47 PM

Quote :

"I'm at 20% in my 401k"

you are an idiot investing 20% in 401k. At most you should do up to the company match. If you still feel the need to save for retirement put it in a Roth IRA.

Currently I put 5% (bumping to 6% in march) with a 3.5% company match (4% company in march).
1.5% in a separate Roth IRA
Saving 22% in Money Market Acct.. Once I build up $5000 as emergency fund . I will begin creating CD's and fueling my discretionary investment account (when market turns around).
I plan to pay the min on my 4.6% consolidated student loan.

Buying a house is pretty low on my priority list....

12/15/2008 6:35:15 PM