topic Re: Need some financial advice in Personal Finance

Need some financial advice

Anonymous — Fri, 12 Apr 2019 14:07:44 GMT

Hi all.
I’m going to be getting a settlement from a car accident and really need some advice.
I’m getting around $23,000 and I really want to buy a house. I’m planning on using some of it for a down payment but I’m torn between using some of it to pay down my student loans. I have about $18,000 owed in student loans and they are about 7 years old. I had financial trouble in the past and I had to do a forbearance. I’m currently paying them down monthly but I now owe more than I borrowed. This is probably going to be an issue when I want to get my mortgage loan. So the question is, do I use some of the money to pay off maybe $5000 towards them? Is that amount too much or not enough? I can’t really afford a financial advisor so I’m hoping to get some good suggestions from this forum. I should also say that I have more than $10,000 in a Roth IRA that I could use towards the down payment but I’d like to not have to use it if I don’t have to as that’s all I have towards my retirement. I also have no collections on my report. The student loans and a car loan are my only big debt at the moment.
Thanks in advance for the replies

Re: Need some financial advice

Anonymous — Fri, 12 Apr 2019 14:19:02 GMT

I personally would pay off all of the student debt. The best case scenario I would think would be to pay off the student loans, and save for a downpayment and nest egg. Home ownership can be a blessing or a curse. If there is some unforeseen issue with the house, could end up regretting it. You can probably keep your IRA, just dont contribute more to it for the time being. But there are other factors that we dont know. Your income, how quickly you can save, or if you bought a house how quickly you could pay off your loans. And make a budget, and try to get realistic numbers on the cost of homeownership. HOA, property tax etc. If the budget looks tight, do the budget again if you didnt have the loans. Just make sure you take your time and plan appropriately.

Re: Need some financial advice

Anonymous — Fri, 12 Apr 2019 14:53:19 GMT

It’s just that I’ll probably never have that large amount of money all at once again so I definitely don’t want to put it all towards my student loans. I’m willing to put about $5,000 towards it. I definitely need a good amount put aside for the house. I’m not too good at saving because I’m a single female and I live alone so everything I make goes towards rent. I pay about $1000 a month to rent and would really rather pay that towards my own house. I’m also 43 so I’m not getting any younger.

Re: Need some financial advice

xaximus — Fri, 12 Apr 2019 16:51:23 GMT

In that case, I would go ahead and pay down the student loans by the 5k. Put the rest towards the house, but also, some things I'd like to add.
- Try to limit your expenses and to save whatever you can. Examples of this can be - canceling cable, getting a cheaper phone plan, etc. The end goal here is to reduce your expenses however you can. There are some expenses that you may not be able to decrease (i.e. rent), but there are others that you can.

- If possible, look into a second part time job, buying/selling things on different platforms, etc. to bring in more income. That you can put aside and save for the future.

As mentioned before - owning a home can be rewarding yet can also be expensive. It's good to have a bit of cash on the side in case things happen (which they usually do).

Re: Need some financial advice

rbentley — Fri, 12 Apr 2019 18:45:26 GMT

You really haven't given us enough information or background to really advise you. A FA would want your income, debts and a budget. I have to second the advice above. Your student loans are a problem. You admit that seven years later you now owe more than you borrowed. You're "not getting any younger" and it appears they are not getting smaller. I would strongly encourage you to entirely pay off those loans or make a substantial (much, much more than $5k) payment on them. Given that this is a sudden windfall that will not be repeated you are better off using it to get out of debt rather than leveraging it to go into more debt with a mortgage. Paying those loans off is likely to significantly help you score and improve your chances of getting a home loan with the lowest possible APR. That can save you tens of thousands dollars in interest over the life of your home loan. Should you run into financial troubles again in the future you may be able to refinance or sell your home and come out ahead. The loans however could trigger a casade of defaults that takes your home and the downpayment with them. Pay them off while you can.

Re: Need some financial advice

Anonymous — Fri, 12 Apr 2019 20:14:23 GMT

What we did with our tax refund & state refund and any extra money we got around that time we threw it all on our cc debt. Almost paid the two cc’s off and now weve been splitting it. Half savings for house half onto cc’s. Ive seen hubbys credit score improve immensely so thats what we decided to do, in the long run itll save us alot of money in interest w the home loan & those cc’s now. Honestly if i was getting 23k & your student loans are 18k id split the 23k. Half to student loan half towards house savings. But just my opinion.

Re: Need some financial advice

SouthJamaica — Sat, 13 Apr 2019 11:27:25 GMT

@Anonymous wrote:
Hi all.
I’m going to be getting a settlement from a car accident and really need some advice.
I’m getting around $23,000 and I really want to buy a house. I’m planning on using some of it for a down payment but I’m torn between using some of it to pay down my student loans. I have about $18,000 owed in student loans and they are about 7 years old. I had financial trouble in the past and I had to do a forbearance. I’m currently paying them down monthly but I now owe more than I borrowed. This is probably going to be an issue when I want to get my mortgage loan. So the question is, do I use some of the money to pay off maybe $5000 towards them? Is that amount too much or not enough? I can’t really afford a financial advisor so I’m hoping to get some good suggestions from this forum. I should also say that I have more than $10,000 in a Roth IRA that I could use towards the down payment but I’d like to not have to use it if I don’t have to as that’s all I have towards my retirement. I also have no collections on my report. The student loans and a car loan are my only big debt at the moment.
Thanks in advance for the replies

My advice is to pay off your loans, and postpone your plan to buy a house.

Re: Need some financial advice

AverageJoesCredit — Sat, 13 Apr 2019 12:23:19 GMT

Agree with @SouthJamaica, i would just pay off your Student Loans. Getting rid of that debt will be great. Im clueless on real financial stuff but were it me , id want to get rid of debt i owe. Youll still have a 5k left to put in savings.

Re: Need some financial advice

CreditInspired — Sat, 13 Apr 2019 12:47:34 GMT

You know what @Anonymous, since your heart is set on buying a home, that is exactly what you should do. So here are some steps going forward to make a decision having all the facts:

1. Discuss with your banker your interest in buying a house. He will tell you your DTI based on student loan and whether it is doable with your income and other CC/loan payments .

2. Take his answer to heart. If he says the student loan needs to be paid off in order to buy a house, then that’s the realistic thing to do. If he gives you a lesser amount to pay down student loan, then you have all the information needed to make a decision.

3. Also, talking with a lender will give you an idea of how much home you can afford to buy, the down payment required, and an estimate of closing costs.

Are you a member or have a military-affiliated family member that belong to NFCU? If yes, they offer 0% down mortgage loans.

I understand wanting to buy a home when a huge portion of your paycheck is going toward rent and taxes with no write-off. But with the new tax law, the deductions claimed are much higher for 2018 than previous years.

Homeownership is the American dream and I understand that even if there are some pitfalls. I don’t regret one moment of being a homeowner.

Once you have all the facts in hand, you’ll be able to make the decision that works best for you.

GL2U

Re: Need some financial advice

Anonymous — Sat, 13 Apr 2019 14:56:59 GMT

@creditinspired thanks, that’s exactly what I needed to hear. My heart is definitely set on buying a home. I’ve rented all my adult life, dealt with the worst deadbeat landlords ever and I’m tired of it. I really want to do what’s right with this money. Paying my student loans is something I’ve gotten serious about within the past 2 years and I don’t have any late payments on them, although they’ve been put off for a while.
I’ll talk to a lender and see what they say. Thanks for your advice
Thanks everyone for your advice so far, and keep it coming. I want as many opinions as possible

Re: Need some financial advice

Revelate — Sat, 13 Apr 2019 19:08:01 GMT

I would second the advice to at least have the conversation.

You can pretty easily napkin math out the costs between renting and home ownership: I certainly don't recommend creating higher monthly debt obligations if struggling now (which wasn't clear) but sometimes it just works out more cheaply than renting anyway... plus all the usual financial upside of long term real estate appreciation but that admittedly depends on where you are buying specifically.

Also long term, it's a huge financial win potentially even without appreciation... I'm not tied to my current place at all, but I was doing the math last night and if I buckle down and just pay off the damned auto loan and then mortgage my monthly obligation goes to 1k/month between HOA and real estate taxes. That's it, in LA, 30ish minutes from LAX (sans traffic) which gives me access to all sorts of gigs in this economy, weather is more than nice, I have some friends here, and I need some place to store my **bleep**.

Which all added up to, why move? Or at least why move without a clearer picture of the future?

It's good to have a plan, and other than some absurdly priced areas where it makes no sense to try to buy a place now unless you have walk away money anyway, I really can't see much downside long term to home ownership as long as due diligence is done both in terms of what you can afford, the location, and no unknown major issues.

Re: Need some financial advice

Anonymous — Sat, 13 Apr 2019 20:11:23 GMT

Since DW is the broker/owner of a midsized real estate brokerage firm and we also work as advisors for several large fix and flip hedge funds we are very biased toward home ownership. Our suggestion 1) talk to a morgage BROKER and see what they suggest as far as paying down student loans. 2) FHA has some great deals with 3.5% downpayment . 3) Usually you will get the biggest bang for the buck by buying a "dump" ie the WORST house inthe subdivision condition wise that you fix up in the BEST nieghborhood/subdivision you can afford. We have several hedge fund clients that have made millions buying trash in great neighborhoods and fixing them up. Hose hunting intodays market can be stressful. There is limited inventory. Look at the HUDHOMESTORE.COM This is HUD foreclosure site.It is a free site. They give owner/occupants first shot

Re: Need some financial advice

OmarR — Tue, 16 Apr 2019 22:38:12 GMT

@SouthJamaica wrote:

My advice is to pay off your loans, and postpone your plan to buy a house.

This is the best advice in this thread. I would pay off your car as well.

OP,

If you already feel like you have an issue with saving money, than it's not going to get any better with you tacking on house debt in addition to student & car debt. Not to mention the interest that you are accumulating every month. Pay off ALL your debt with your settlement, and than whatever monthly debt payments you were making, pay that into a savings account. Build up your wealth, and than, if you decide, see about buying a home.

And if you are only making minimum payments (or close to it) on your student loans, than that is also a clear indicator of what you should be doing. There is a reason why student loan debt has surpassed credit card debt in this country. You have to break that vicious cycle and free yourself.

Re: Need some financial advice

sjt — Wed, 17 Apr 2019 17:39:35 GMT

@Anonymous wrote:
@creditinspired thanks, that’s exactly what I needed to hear. My heart is definitely set on buying a home. I’ve rented all my adult life, dealt with the worst deadbeat landlords ever and I’m tired of it. I really want to do what’s right with this money. Paying my student loans is something I’ve gotten serious about within the past 2 years and I don’t have any late payments on them, although they’ve been put off for a while.
I’ll talk to a lender and see what they say. Thanks for your advice
Thanks everyone for your advice so far, and keep it coming. I want as many opinions as possible

Do you have any other debt?

Re: Need some financial advice

Anonymous — Wed, 17 Apr 2019 17:47:14 GMT

The only debt I have are the school loans, my car, and my monthly rent and utilities. I have 5 credit cards that I do not use. I have no collections.

Re: Need some financial advice

sjt — Wed, 17 Apr 2019 18:20:39 GMT

@Anonymous wrote:
@creditinspired thanks, that’s exactly what I needed to hear. My heart is definitely set on buying a home. I’ve rented all my adult life, dealt with the worst deadbeat landlords ever and I’m tired of it. I really want to do what’s right with this money. Paying my student loans is something I’ve gotten serious about within the past 2 years and I don’t have any late payments on them, although they’ve been put off for a while.
I’ll talk to a lender and see what they say. Thanks for your advice
Thanks everyone for your advice so far, and keep it coming. I want as many opinions as possible

Keep in mind that a lender/mortgage broker's advice is centered around qualifying for a loan. You also have to consider the true cost of home ownership.