Buying a house with debt?

by Erika Torres

1643984I had dinner Friday night with a group of married friends, three couples of which are homeowners, and two of which are not (Eric and I included).

One couple had recently purchased a house and they were talking about a financial course they were taking and how it stressed the importance of savings. This couple did not have a savings account.

They knew that Eric and I were renting, and asked why, given the low financing rates, we have not thought of buying a home.

I said for two reasons:

  • Eric still does not have his full-time firefighter job
  • I still have $18,000 left in student loans

While we do plan on buying a home one day, Eric having his job is almost imperative to saving up for a down payment. *Edit: Three-bedroom houses in our area go for 400-600K, a HUGE investment.*

Two of the homeowner couples responded that they both had student loan debt, one couple had $60,000 in student loan debt, while the other had $50,000 or so (the number wasn’t entirely clear but it was high).

I was shocked. Absolutely flabbergasted.

I cannot imagine buying a home with that amount of staggering debt.

In fact, our game plan for buying a house goes in this order:

  • Have Eric be hired for a firefighter job
  • Pay off all extra debt (my student loans, Eric’s student loans)
  • Save up for a sizable down payment

We may buy a house before we completely pay off the debt, but for the most part, I hope to have as little debt as possible. But I absolutely could not imagine buying a house while Eric was at his current job–I don’t care how great the mortgage rates are!

What always kind of perplexed Eric and I is that one of the husbands who is a homeowner, has the exact same job Eric has. So we know exactly how much he makes. And the wife works at a church, so we know it’s not like she’s raking in the dough.

We always wondered how they were able to afford a home when they make less money than we do. It turns out that for a year before they got married, she saved for the down payment and that is how they were able to buy the house. But they still have $60,000 in student loans.

While it’s absolutely remarkable that these couples could purchase a home, I know that for my own sanity, I would feel completely uneasy and anxious buying a house while still having my student loan debt. Perhaps because I know I can pay it off within the next two years, to me it is more important to wait until we feel financially secure than to rush into buying a home because the market dictates it.

I would never want to get to the point where we depend on every single penny of our paychecks to get by. While we are strapped for cash now, we always contribute even a nominal amount from our paychecks into savings. And I also have 10% of my pre-tax income directly deposited into a 401K.

We also found out this weekend that our landlord is keeping our rent the same for the next year. This was a HUGE relief. He did say however, that he will be raising the rent by $100 next year since he did some research on local properties. We know we are getting an incredible rate right now, so we hope to milk it for as long as we can!

Did you buy a house with student loan debt? Would you buy a house if you still had large amounts of debt?


Related Posts


Mr.CBB's Personal Finance Reading List #5- Hello Blackberry Z10 and Show Me The Money Ticketmaster! - Canadian Budget Binder January 8, 2014 - 4:31 am

[…] Newlyweds On A Budget- Re-evaluating Buying A Home and Buying a House With Debt […]

Lorenza August 8, 2013 - 11:06 pm

You have made some good points there. I looked on the net
for more info about the issue and found most people will go along with your views on this web site.

Reply June 29, 2013 - 7:11 pm

This is a good tip particularly to those new to the blogosphere.
Simple but very precise info… Appreciate your sharing
this one. A must read article!

Weekly Cowgirl Rodeo Round-up - L Bee and the Moneytree February 9, 2013 - 5:07 am

[…] Erika at Newlyweds on a Budget wonders if it is wise to buy a house before your student loans are paid off. […]

Weekly Reads 02.02.13 | Plunged in Debt February 2, 2013 - 2:05 am

[…] Newlyweds on a Budget: Buying a House With Debt? […]

Adrienne February 1, 2013 - 7:32 am

Okay, I just read this- I’m assuming the original (?) post. That’s crazy! I have $14,000 of student loan debt, and the husband had about $7000, and this feels like SO MUCH to us. I know it’s common- but I can’t imagine that much debt. It’s just unreal.

Obviously it depends on the circumstances, but you and Eric are obviously not comfortable with insurmountable debt- or any debt really- and honestly- I think that’s awesome. Going into owning a home (especially at those prices) with huge debt would be really challenging. And honestly- to me- scary. If you’re renting, and something horrible happened like an accident or job loss (God forbid) you can break a lease and figure something out. But ownership is a whole new ball game. I don’t think it’s ever wrong to be financially savvy and think ahead.

Link Love/Week in Review 2/1/13 | Budget and the Beach January 31, 2013 - 9:47 pm

[…] Buying a house with debt?- Newlyweds on a Budget […]

A blog about newlyweds managing finances in relationships. | Newlyweds on a Budget January 30, 2013 - 8:49 am

[…] think my “Buying a home with debt?” post hit a nerve with a lot of people, but through the comments I got a lot of different […]

Shaba January 30, 2013 - 6:57 am

We have about 80,000 in student loan debt, but we bought our house three years ago because of the tax incentive. It made sense. Our mortgage is equivalent to what our rent was (we bought the house we were renting) and we got a great deal. If we were to buy another home in our area we’d be looking at spending double what we did to buy our current home.
I’m a worrier so before I agreed to buy our house I made my husband sit down and show me that we could comfortably afford it on a single income (my job isn’t stable). That said, we’re not super motivated to pay down the student loan debt. We certainly didn’t think that was a doable goal to have before we bought a house. We max out our 401k’s, we’ve paid off over $14,000 of debt in two years, we don’t have car payments. Student loans are the only debt we have besides the mortgage and a low balance credit card. It bothers me that we don’t have a savings account, but we’re working on a plan to create one. It seems to me though that as soon as we get some money saved something breaks…a car, an appliance. Sigh.

six figure investor January 30, 2013 - 5:31 am

Here’s my perspective which is not typical if the other comments are any indication.

I’ve been out of college for a while and have not bought a home. I can certainly afford it, finances aren’t the issue. For me, this wasn’t something that was important to me, I place a higher value on flexibility and mobility.

I live in a status driven community. The amount I pay in rent is equivalent to the property taxes for some of the homes. I live near the town, have public transit and get all the benefits that the other homeowners get (including the schools).

Also, from a financial point of view, renting is a slam dunk. With all the money I’ve saved, I can pay rent from my investments alone. So, renting provides flexibility as well as a higher level of financial security.

If you do want to buy I suggest that you take a hard look at the finances of it. What most people do when they buy is that they buy more house than equivalent rent. So, for example, if you rent a 1500sq ft condo, you may buy a 2500sq ft house with land. So this has the effect of increasing your housing cost.

Compare equivalent houses and then calculate if buying is cheaper (in many cases it is, the real kicker is the low interest rates). If you do want more house make sure you have room leftover for other expenses and saving.

Glen @ Monster Piggy Bank January 30, 2013 - 4:23 am

This is obviously a personal choice and not something that you should race into. If you think you are ready to take on a mortgage debt at this point in your life then that’s fine, but if you aren’t then that’s also fine.

I waited until I had at least a $50,000 deposit which I got by working 2 jobs 13 days a fortnight. It wasn’t fun, but it got the desired result.

Canadian Budget Binder January 29, 2013 - 10:14 pm

If there is one thing I learned it’s never to judge a book by it’s cover, meaning never comparing ourselves to others as each persons situations are different. In this case you found out she saved for a downpayment previous. No we did not buy our homes with student debt and likely would not have as we would not feel easy about it. Like you we would want to get rid of the debt first or near most then buy a home. Houses in our area are around the same starting close to 400k and going up. When we bought our house we had no consumer debt, no student loans ( we both went to school twice) and saved for a big down payment on our home. We lived in a small space with rent $500 all incl a month for rent for a few years and saved all our money even when I was in school and working. It’s all personal decision though and plenty of people do it but we just didn’t want to spread ourselves thin. In the back of our minds as well we wanted to be able to live off of one income just as a plan B… it worked.. we didn’t take the huge mortgage they offered, we found a super deal on a home that is now up 100K and we have the cash to pay it in full in less than 4 years and that’s because of 1- budgeting, 2- nice down payment, 3- frugal lifestyle 4- going in with no debt 5- positive attitude and setting goals 6- no kids yet. .. it can be done but it’s what matters to you that is most important in your life and your values. Like I said, we’d likely do the same. Keep up the great work you two! MR.CBB

Mer January 29, 2013 - 10:35 am

Every situation has a thousand unique considerations that add up to when, or if, a home purchase is right. You could wait forever and it will never be right for you (especially if you’re in an expensive area). Or you could wait until it is and only realize in hindsight you missed the chance. It’s about what makes sense for you.

My (now) fiancé and I bought a house together two years ago. We didn’t get engaged until last year. We’re not getting married until this summer. We decided the timing was right for us, based on interest rates and home prices vs. rent prices in our area, to purchase. We were committed to each other, and realized that honestly it’s harder to get out of a house than a marriage these days. We could wait a few years to save for the wedding, but we might miss out on low rates and prices if we waited on the house. So we bought the house. Now, we’re paying for the wedding (without bringing on new debt).

We bought the house at a time when we both had car loans. He paid his off (early) a month after closing. I paid mine off (early) last year. I also brought about $10K in student loans (with rates lower than the great mortgage rate we got) to the relationship. He had no debts other than his car. My student loans should be paid off (several years early) by this time next year. We’ve also paid extra on the mortgage every single month, and are about a year ahead so far.

So, no, our (my) existing debt wasn’t a factor in deciding to buy a house at 25. We deliberately sought out a loan for an amount we felt would allow us to buy a good-sized, newer home and also still afford to enjoy things we like to do (like eating out a few times a week and building savings). The mortgage calculators we looked at online told us we could qualify for twice what we asked the banks to pre-approve us for. We didn’t even look at homes over the budget we ourselves determined, nor tell our realtor we could “afford” more. In the end, we got the house we love for about $15,000 under our comfortable budget (low enough that his salary alone could cover our monthly expenses). Because the rates and prices were low, we bought a well-maintained 4-bedroom house that’s not too big for us now but is still big enough we can grow a family into. We skipped the “starter home” and went straight to what we hope is our forever home: a nice house, in a nice neighborhood, in a community with some of the top schools in our state. Now, we’re two years into our mortgage and could conceivably have this house paid off by 40. Our goal really is to be mortgage-free by the time our future children get to college.

It worked out for us, despite our existing debts, because we carefully planned to buy less house than we could afford and also had debt payoff and savings strategies in place. So, I think this is totally a personal decision. Do people make stupid housing/debt choices? Absolutely. But not every choice to buy a house while in debt is stupid.

Good luck with figuring out what timing/strategy works for you.

Chris January 29, 2013 - 9:54 am

We live in the most expensive county in the Rocky Mountain Region of Colorado. We are debt free and currently saving about half of our take home pay each month towards a down payment on a house. We do this by living in a meager apartment, albeit not a ‘love shack’ for $900/month; getting around using a combination of paid for car, public transportation, and bicycle; and generally living below our means by not eating out alot and limiting any compulsive spending. We are shooting for end of 2013 to have a 20% down payment on top of our emergency fund.

We are rather adamant about saving 20% for the downpayment. Why? Because we can, and while our desire to move into a house is continually getting stronger, our desire to limit avoidable expenses such as PMI trumps that desire to move into a house right away.

There are two things that might push us to purchase a house sooner. One being what we feel is a race against interest rates rising. We fear these low interest rates will not last as long as we would like. The other is a business that my wife is building out of our home that is growing faster than anticipated and requires a more central location and larger space.

If we weren’t out of debt and in a position where we can save alot, we would likely be more inclined to just purchase a house and deal with the added costs of PMI because we are really just ready for the next step of buying a house.

Akirah January 29, 2013 - 7:55 am

We are buying our building in the next few months and it makes sense for us because A. our business is there and B. our mortgage will likely be MUCH less than our rent. It’d be ideal for us to wait til I had a FT job first, but the owners are gonna list it and we can’t risk losing our building. But I think it’s not bad to buy while you have debt, simply because renting is not any kind of investment. So I see your point of all the debt being overwhelming, but if you are making that kind of investment, I don’t think it’s awful.

BUT taking the time to help Eric get a job AND to save for a downpayment do seem like good reasons to me. Thankfully we have a bit for a downpayment ($10000), so that’ll be helpful to us.

Lea January 29, 2013 - 7:13 am

What you’re doing is perfect! It makes the most sense financially and is much less of a burden or stress on your shoulders than doing it the other way. We had tons of people telling us we were throwing our money away renting, but I didn’t want to buy a house just because it was the next step in life and because other people expected us to.

Financially, renting can be just as good as owning a house and despite being a home owner now, I am still sitting on the rent vs. buy fence. No matter how much money you’re putting into real estate, you’re also still throwing your money away on property taxes, utilities (often combined with rent), and repairs – none of which add to the value of the house.

Ariel January 29, 2013 - 5:40 am

I think I commented on this subject before in regards to home ownership. We bought our house almost exactly three years ago, about 10k students loans all together hovering. That said, three bedroom houses around here are around 60-90k, depending on how bit the lot side is, too. We bought our 3 bedroom house for 72k and it sits on an acre of land. We make above average income for the area and this was when they were offering the HUGE incentive to buy houses (we got 7k back just for purchasing a house). So there’s that. We felt financially secure enough to take on a mortgage (which was only about $50 more than our rent) and we jumped in. I’d love to flip this house in a couple years, so hopefully we can upgrade later 🙂 I think it just all depends on what you’re comfortable with. If you have financial warning bells going off at the thought of a mortgage (and, honestly, a 400k house in this area would have to come with its own MOAT, wow) then do what makes you comfortable.

Holly@ClubThrifty January 29, 2013 - 4:17 am

We still had about 17K of student loan debt when we bought our first house. But, we didn’t have any other debt.

I don’t blame you for waiting. You will probably thank yourself for it!

Budget & the Beach January 28, 2013 - 8:20 pm

I don’t have either (a student loan or a house), mainly because of how much it is in LA and my crappy freelance income. And I only have a little debt, so I totally get where you’re coming from, and don’t blame you for thinking the way you do!

Sonya January 28, 2013 - 7:01 pm

I agree with you! I always wonder how other people do it. We have some small debts we want to pay off which will be gone this year. I’m not even looking at student loan debt because it will never end. We need time to save up for a down payment and we have some credit that needs cleaned up before we think about it. I don’t feel bad because we rent and I love that if something breaks, it’s not us paying to fix it:)

Nicole January 28, 2013 - 6:51 pm

I think a lot of it is context. My husband and I currently have about $110k+ in student loans, and still taking out a few k for his tuition (gulp, I know!). I have my MD and he’s working on his PhD (unfortunately at a private school so we could live in the same city), and actually, if that number was from my MD alone, it would be below average and pretty impressive as it was, despite the terrifying number of zeros. Neither of us have debt from undergrad. That said, I think it is likely that we will still have loans left when we buy a home. Our criteria for home buying are: 20% down payment, stable emergency fund and plans to live in the same city for 5+ years. Currently, we only have the emergency fund met so we are renting! Our careers have just required such sizeable debt that we have to plan our lives around having them around our necks for a while, because making them our only priority until they are zero would be unreasonable. We could pay off $10k of them…and then have no emergency fund. We could not go on a vacation for 10 years, but then we would be really depressed. That being said, we also plan to pay off our loans way sooner than some of my colleagues will likely, because we are very debt averse. We are also the most frugal in our group (we share a 17 yr old car!). So, every situation is unique! Buying a house with large consumer debt…that’s the one I really don’t understand. But we can’t wait to be homeowners but it’s going to be a far off possibility! Especially because houses in our area start at $500k for 2 bedrooms 🙁

Kathleen, Frugal Portland January 28, 2013 - 5:14 pm

SAME boat — I felt really icky about how I was going to buy a house while still in debt and now I am not — and I feel way better!

Mrs. Pop @ Planting Our Pennies January 28, 2013 - 5:09 pm

All of our student loans were paid off before we bought our house, though Mr. PoP did have a car note that we were paying off.

I think it comes down to a personal comfort level, and maybe waiting until you’re sure where you’ll be for a while is the right thing to do. After all, what if the hubs gets offered a position but it’s an hour away? It’s not earth shattering, but I could see niggling thoughts like that being part of why you guys aren’t pulling the trigger on buying a home as well.

Catherine January 28, 2013 - 4:06 pm

We bought our first home while still in significant debt…for us it was simple. Our mortgage is less than our rent was (you can buy a decent home here for 200k) We need a roof over our heads and we’d rather be working towards some equity while still paying debt off full well knowing it’d likely be 7-10 years before it was totally gone. If we had to wait to save for a 400-600k house it would probably be an totally different story though. I think it is justified depending on the housing market.

Teacher Girl January 28, 2013 - 3:16 pm

I think that buying a house debt free is ideal, but you guys are paying rent, which can sometimes be the same or even more than a mortgage. I don’t know about the market where you live, but I know that was the case for me. I pay LESS in living expenses with a mortgage, so for me, buying a house even with my debt was a better financial decision.

In any case, you have to do what you’re comfortable with.

Dancy January 28, 2013 - 2:29 pm

I feel your pain. We bought our home a year ago. Avg. prices start about the same as yours & we’ve got the highest property taxes in the US!! We were able to save just enough for a partial down payment. I forced myself to pay off my student loans years ago but my hubs still has a good chunk to go (20k+). There’s no way we’d have our home if we hadn’t qualified for an FHA loan & landed a low-interest 30yr mortgage. I will admit that our payments are a bit higher because of the PMI, but we know that’ll go away in a few years. I even lost my job right after we closed – it was scary & tight there for a bit, but we made it work. We live frugally & cut-down where we can. We’re also in the process of looking into re-financing only because mortgage rates have dipped so low again that we can get our percentage down a whole point – if we do that but maintain our payments where they are now, we’ll end up contributing much more per year and paying off the mortgage faster & with less interest.

The guy who does our taxes suggested last year that we borrow against the house & pay off Hubs’ student loans b/c we can write off the interest on a mortgage but not on the loans (plus, the interest on student loans is WAY higher). While it’s a great plan, it’s also TERRIFYING – I just can’t imagine tacking another 20-30k on top of our mortgage. While it’s beyond scary sometimes – I love our home, and wouldn’t change a thing about our process. I think it’s kind of like what they say about having kids: You’re never really going to be ready – just go for it. It’s worth it. 🙂

Dancy January 28, 2013 - 2:32 pm

*Just to clarify – our County has the highest property taxes in the US… erm, not our house. 😉 LOL

newlywedsonabudget January 28, 2013 - 3:14 pm

Thank you for your comment Dancy!
I agree that we can’t put our lives on hold for forever while we try and pay off debt, which is why Eric and I HAVE gone on vacations. And while if the possibility of us buying a house presented itself sooner, then heck, of course we would take advantage! It just seemed–to me–that not having a savings account, owning a house and having $50,000+ in student loans was a scary financial place to be in. But we all make the decisions that are best for us, right?

It sounds like you guys got a great deal though!! I hope we can join the homeowners group soon!

SavvyFinancialLatina January 28, 2013 - 2:16 pm

We will be buying a house at the end of 2013 with 20% down payment, and a savings account with enough padding. We rented until we could have 20% down payment. Do I regret it? Sorta? I mean living in an apartment is getting old. Walls are so thin and you hear everything. I didn’t realize this until moving to this apartment because all the other apartments I lived in were chill.
We are going to be looking for a house with good bones and a bargain of course!
I am with you on not having any debt (minimal) and saving up 20%. But not a lot of people follow that philosophy.

CeCe@Frugalista Married January 28, 2013 - 2:01 pm

If only people without student loan debt bought homes that would exclude a big bulk of the population! Tons of student debt holders own homes. That being said, I don’t necessarily think it’s the most prudent especially if you see an end in sight on those loans. A lot of people don’t and expect to pay them off forever so they don’t want to put their life on hold for them. You have do do what makes sense for you. We didn’t have a lot of debt when we bought ours so I’m very glad for that. It would have been more stressful then it already was otherwise.

newlywedsonabudget January 28, 2013 - 3:10 pm

I agree. And I did say that we may still have student loans when we buy a house and I don’t think you need to be completely debt-free to buy a house, but it seemed like $50,000 was just such a large number to me. But you’re right, I can see how if you have such a large amount of debt, you can’t exactly just hold off on your life forever in order to pay it off…

Army Amy* January 28, 2013 - 12:15 pm

Since my husband is in the Army and we are going to be moving regularly for the foreseeable future, we don’t have any plans to buy any time soon. That said, I don’t like having a lot of debt hanging over my head. We’ve payed down our credit cards completely, I only owe a little on my student loan, and a little on our car. I don’t know that I’d need to have everything paid off, but I would want to still have a sizable about in our savings before buying a house.

The nice thing about renting is that there are no added expenses. If the roof needs replacing? Not my problem. There’s a flood (as has happened to me 3 times), fixing it isn’t coming out of my bank account. All those things that come up (and they do come up) add up! I’d feel a lot better about buying if I knew that I had enough to not let those little things make a big dent in my savings.*

KendraD January 28, 2013 - 11:41 am

I think different things work for different people financially. Some people don’t splurge at all until they pay off all their debt – no trips, no new clothes, no eating out, etc. That’s never been for me. I like traveling, I like eating out, I like buying new clothes.

I can understand the idea of preferring to make the investment of a home rather than “throwing money away” by renting. You might be surprised to find that your friends are equally surprised by your willingness to “lose” the money you pay in rent each month. I’ve had friends in both camps. The homeowners were always flabbergasted that anyone would rent after college and the savers felt like you do that taking on a mortgage with a significant amount of other debt isn’t wise.

There are plenty of anecdotal stories on both sides to illustrate the good, bad, and ugly of each point of view. Thanks for the good reminder that different things work for different people.

newlywedsonabudget January 28, 2013 - 11:56 am

very true! which is why i said it was absolutely remarkable that they could do it.
And I know that when it comes for our turn to buy a house, it will absolutely make me crazy because it feels like such a big investment and risk!

Margaret January 28, 2013 - 11:24 am

What I am struggling with is, that I want to be debt free + downpayment to buy a house. (3 years?) But the house prices in our city keep going up and up at a rate of about 10-15% a year. If we keep waiting we will be priced out. 😐

newlywedsonabudget January 28, 2013 - 11:35 am

I always, ALWAYS wonder how some people manage to do it ALL- ie be debt-free, buy a house, have the new car…because I know we can’t with our financial situation. However, that’s something you really have to think about. If house prices are going up that quickly, it may be wise to go in now. However, if you’re struggling with 100K in student loan debt, how important is home ownership to you?

Janelle January 28, 2013 - 11:20 am

We live in California and home prices put ownership out of our reach for most of our adult lives. It was fine, we accepted that, and were model long-term tenants happily renting homes while saving our money for the future … after we paid off the credit card debt we accrued in our 20s and early 30s. We were debt-free for more than 12 years before we became homeowners, and I admit we had no specific goal in mind for our savings. To us we just wanted to stay debt-free and be prepared for the right opportunity when it came along.

In late 2011 we realized housing prices had really and truly dropped and homes were available in desirable areas and with a price range comfortable to us. Within 2 weeks found the location of our dreams and a home with bones we felt we could love (it was hard to be absolutely sure under the 70s era wallpaper and hideous carpet and popcorn ceilings). The result was we put down 20% and still had cash to do repairs (new roof, new deck top, and pool resurfacing) and remodeling/updates without undue financial stress. We have no regrets about waiting until this late in our lives (50 and 54 at time of purchase) to take this step.

I never think we wasted money renting all those years. We raised a family in a lovely home, saw the kids through high school in another that was in the same town and school district. Had we tried to buy even 5 years ago, we would have had to compromise and settle a lot more on location/neighborhood and floor plan than we really wanted to make it work financially.

From Shopping to Saving January 28, 2013 - 11:02 am

I actually used to think that way too, I wanted all debt to be gone before purchasing a house, but in my situation it just won’t work! I’ll have way more debt that your friends and I definitely want to buy a condo. For me, it’s not about depending on each paycheck but more like investing in something besides just renting. The reason is because if we rented until our student loans were paid off, it could take possibly 10 years. I’m not sure how much my first job out of school will pay haha so that is probably the worst case scenario.

J.Mill January 28, 2013 - 10:52 am

Some might be “flabbergasted” that anyone would spend money on a vacation while in debt… or spend money on renting a bigger house while in debt… or go back to school while in debt.

Houses, advanced degrees, vacations, creature comforts are all “investments” in some way. They are personal choices.

Sometimes the overall cost of a home is not swayed too far by the size of the down payment. For instance my husband and I chose to keep more of our money in savings rather than add it to a down payment. We simultaneously chose to pay our mortgage down faster by making over payments every month. Paying our house off early with an awesome rate is going to be cheaper than waiting longer to get a larger down payment. We still bought within our means, though, and had a reasonable down payment.

newlywedsonabudget January 28, 2013 - 11:26 am

Perhaps it’s because I know that homes in our area easily go for 400-600K. It may be different for someone where houses are under 200K but here it is really a HUGE investment. And I am not saying that I would have to be completely debt free before buying a house, but I could not feel comfortable doing while still having nearly half a hundred thousand dollars in debt…

Jen January 28, 2013 - 10:45 am

Interest rates are so low on student loan debt that I wouldn’t let a smallish amount (>$20k) stop me from buying a house. Credit card debt and car payments would be a different story though. That being said, I wouldn’t buy a house without at least a 20% down payment and housing in our neck of the woods starts at 500k and goes up fast. The idea of taking out $400k in a mortgage? That idea freaks me out…I don’t care how good interest rates are.

newlywedsonabudget January 28, 2013 - 11:23 am

that’s the boat we are in. we’re easily looking at a 400k mortgage…

Ceci Bean January 28, 2013 - 10:25 am

We bought a house when I still had about 13k in student loans. While I will be very relieved to see the student loan debt gone (about 6k left to go), it didn’t feel important to pay it off before buying the house. The bigger thing to me was that I didn’t want to feel house poor, so we bought below our means and can still make healthy payments to the student loans.

If we had had credit card or something like that, we would have paid it off before considering a house, for sure.

Shellie January 28, 2013 - 10:20 am

I used to be in the same boat as you. I REFUSED to buy a house without a fat down payment and a sizeable savings account. One day a coworker of mine and I were discussing it. He is a homeowner. He said to me “You are never going to be totally ready. I own a house, and sometimes we have no savings at all. Things happen, you make it work. Don’t miss the chance to save thousands in interest just to wait to be ‘safe'”. I don’t really know why it struck such a cord with me, but it did.
We casually met with a broker just to look at options. Ended up qualifiying for a BIG loan with LOW interest. We found and bought a house that cost about 75% of the amount we were approved for. We could easily budget it in. Now, 2 years later we have paid off over $30,000 in debt and bought a newish car all while improving the home we are earning equity in. I am SO GLAD I wasn’t stubborn and gave it a shot. We decided to buy a very newly built home (2006) since it would have less of a chance of needing big repairs soon. We have so far (knock on wood) been good in that department.
I know that won’t work for everyone. We live in an area where houses only cost $150-200 thousand dollars.
I guess I just wanted to share and say maybe look into it just to see what you could do. If you can have a mortgage that is only $200 more than your rent, would it be worth it? Push back the debt repayment a bit in order to build equity? Or wait until you are debt free and risk paying thousands more in interest over the life of a mortgage?
It can never hurt to just talk to a broker and get an idea, even if its just to put your mind to rest that it is definately something you are not willing to do right now.

Jennifer January 28, 2013 - 10:11 am

This is going to be a long comment but here goes…

When we got married, my hubs had $10K in credit card debt. We immediately paid that off (well, over the course of a year). We then decided to buy a house because of good rates. At the time, we had a car loan and about $18K in student loans.

Sometimes I look back and wish we would have stayed in our apartment for at least another year. We were paying off large chunks on everything when we lived there and now we do not. We probably also bought a house a little more expensive than we should have, but not completely out of our range. We just paid off our car loan this month so now I am set on aggressively paying off our student loans. I go with the method of paying off the lowest loan amount, not necessarily the one with the highest interest rate. It helps me to feel happy and successful when I pay off debts, and gives me motivation to keep going.

We could be living more cheaply and paying off more now, but we just haven’t found a great budget system that works for us!

Micah January 28, 2013 - 10:10 am

I did buy a house with student loan debt. I really didn’t have a lot of choice when I moved for my job. Rental properties were limited and there were none that allowed pets. And, no, I wasn’t getting rid of my cats. People suggested I do that, and I wanted to slap them. So, really, my only option was purchasing a home. I don’t regret it — even though I will be moving out less than two years later. It was a good experience, and I loved my house while I lived here. Also, the interest rate on my student loans (I still owe about $10K) is so low, my payments are super small and a minimal concern.

Michelle January 28, 2013 - 10:01 am

We are currently saving up for a large down payment for when we buy our next house next year. I don’t think I would buy though if I still had student loans then (ours will be wiped out in March of this year)!


Leave a Comment