“I guess I am just looking for general advice”: Newly debt-free DINK couple with a growing savings pot. How can we prioritize home buying while managing student loans?

Hello Money Minder,

Hey there! We’re a DINK couple, both 27 years old, bringing in a combined income of 210k USD per year (156k + 54k). We’ve got some student loan debt hanging over our heads, amounting to 160k USD, but luckily it’s on hold until May 2025 with no interest piling up. After all the deductions, we’re left with a net income of 11.5k USD per month. We manage to save about 5k USD per month because we’re not attacking those loans just yet.

Credit scores? A solid 730+ for both of us, thank you very much. This year has been major for us financially, as my amazing wife supported me through school. We’ve got around 35k USD stashed away in savings, eyeing homes in the range of 450-600k USD in our city. Our main focus right now is to build up our emergency fund and set aside a sweet 10% for a down payment. Loans are there, but we’re leaving them on the backburner for now.

We just want to ensure we’re on track for long-term financial success while reaching our goals. Any tips or thoughts you have would be super helpful and appreciated!

Farewell,
House Hunter

Response from THE MONEY MINDER:

Hello There,

Congratulations on reaching this milestone of no longer living paycheck to paycheck and embarking on the exciting journey of homeownership! It’s clear that you and your spouse are dedicated to achieving your financial goals. Considering your combined income, current savings, and monthly savings rate, you’re well on your way to reaching your target for a down payment on a home.

Given your financial situation, it’s important to approach the process of buying a home with a realistic and practical mindset. While your student loan debt is currently on hold, it’s crucial to keep an eye on the future when interest will start accruing again in May 2025. It might be wise to allocate some of your savings towards paying down this debt before interest kicks in to minimize the long-term impact.

Additionally, aiming for a 10% down payment on a home is a great goal, but keep in mind that putting down 20% can help you avoid private mortgage insurance (PMI) and potentially secure a better interest rate. You might want to consider a timeline that allows you to save up for a larger down payment to reap these benefits.

It’s also essential to have a fully funded emergency fund in place before committing to a mortgage. This fund should cover 3-6 months’ worth of living expenses to provide a safety net in case of unexpected financial challenges. Once your emergency fund and down payment fund are in place, you can start aggressively tackling your student loans while still prioritizing saving for your future home.

Overall, it sounds like you are well on your way to achieving your homeownership goal while setting yourselves up for long-term financial success. Keep up the good work and stay focused on your priorities. All the best from THE MONEY MINDER as you continue on your financial journey!