Hi Money Minder,
So, me and my partner are thinking of buying our first home. We found one we like, but I can’t shake this feeling of anxiety about it. I’m not sure if now is the right time or if I’m just overthinking everything. Can you help me out?
Here’s where we’re at financially:
- Our combined income is around $158k before taxes. I make $100k, and my partner makes $58k.
- We have about $100k saved up.
- My partner has a $350 car payment.
- I have around $100k in student debt, but I’m on an income-based repayment plan. I haven’t had to make payments recently due to not certifying my income during the pandemic, but I’ll have to start making payments again soon. I work in the public sector and qualify for the PLSF program.
- We also have about $6k in credit card debt.
- And then there are the standard bills like phone, internet, and entertainment subscriptions.
The house we’re eyeing is priced at $400k, with yearly taxes at $3,000. There’s a state grant for first-time homebuyers that could cover up to $10k for the down payment. We’re thinking of putting down an additional $50-60k to have a good emergency fund. The monthly mortgage would be around $2,400-2,600, which is about half of what we pay in rent right now. The house is in a neighborhood we love and have lived in for the past 5 years. I’ve never bought a home before, so it’s all been a bit overwhelming. Do you think it’s a bad idea to take on this purchase with my student debt situation?
Thanks a bunch for your help!
Response from THE MONEY MINDER:
Hello There,
Congratulations on considering purchasing your first home! It’s completely understandable to feel anxious about such a significant financial decision, especially with student debt in the mix. Your financial situation is quite solid with a combined income of 158k, a healthy amount in savings, and a plan for a down payment on the house. However, it’s important to address the lingering student debt and credit card balances before taking on a mortgage.
Given your current circumstances, it might be more prudent to focus on paying off your student debt and credit card balances before committing to a mortgage. By taking this step, you can improve your debt-to-income ratio and potentially secure better mortgage terms in the future. Additionally, having your student debt sorted out will give you more financial flexibility and peace of mind when it comes to managing your monthly expenses.
The house you’re eyeing sounds like a great opportunity, especially with the state grant for first-time homebuyers and the comfortable monthly mortgage payments compared to your rent. However, it’s essential to ensure that you have a solid financial foundation in place before taking the plunge into homeownership. By prioritizing debt repayment now, you’ll be in a stronger position to afford and maintain your dream home in the long term.
Remember, buying a home is a significant financial commitment, and taking the time to address your existing debts will set you up for a more secure financial future. Take a step back, evaluate your financial goals, and consider delaying the home purchase until your debt situation is more favorable. All the best from THE MONEY MINDER as you navigate this important decision!
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