This is sort of a long post but I have no idea how to approach a mortgage or how much I can afford. I grew up pretty poor- family was intermittently on food stamps, my parents couldn't afford their first house until well into their 40s/50s. They have next to no financial literacy and haven't been much of a resource for me. They worked hard though and got me great educational opportunities and I'm in a position now where I can finally start making some progress independently to set up my future.
I'm actually in a very good spot right now- I had to take out a lot of student loans but have recently inherited some money and can afford to pay most of it off. However, I have also been renting for the past 10+ years and I think its finally time to buy a house as well. I was promoted at work a few years ago and make a pretty good income now. The problem is, I don't know the first thing about how to plan my next steps. My student loans have high interests rates, so my plan was to pay those off first. I would have to use most of my savings to pay the down payment of any mortgage, which would delay paying off student loans. Or, I could take a bit more risk and have a lower down payment for a mortgage and save enough to pay off my loans. I'm really not sure which route to go.
Currently, I have around 180k in student loans. Interest is about 6.8-7% on those loans, all federal, all deferred. I had been making regular payments until the forbearance began and instead used that time to build my savings. I also inherited some money recently so I have just about 200k in savings right now. In my area, most houses are still going for 300-400k. My fiancée and I combined make pretty good income (180k now) and so I think that's within our budget. We're finally looking to buy a house together to stay in for the next 5-10 years (not our forever home, but at the very least to build some equity).
Currently, this is what has been offered to us:
- mortgage 1: 30 years, 10% down, 4.375% interest, for a loan total of 414000 out of a 460k house. The first 15 years are fixed, the next has a 6 mo ARM.
- mortgage 2: 0% down, 5% interest, for a loan total of 460k. Again, 15 year fixed, then 6 mo ARM thereafter for total of 30 years.
- mortgage 3: 10% down, 4.8% fixed 30 years.
I figure I should not wipe out my savings entirely for this purchase, so between the down payment of the loan (46,000) and paying a bulk payment on the student loans, I can afford to spend around 150k. That can get my student loans down to about 84k which I can pay off over the next few years. OR I could take the 0% interest loan and pay off all but about 34k of the student loans but probably pay more in the long term on interest on the house. Finally, I could just wipe out my savings and pay off the student loans entirely and take that risk (I would rather not do that as it seems unnecessarily risky, with the economy in such shambles lately).
Both my fiancée and I are fairly confident in our job security. Thing is, we would like to move to a bigger city eventually so our plan is to pay the house off asap (hopefully 15-20 years). I think it might be possible to pay it off early, or sell the house if the market is right. But I'm feeling overwhelmed right now as I've never had to make these types of decisions before and my family has no idea where to start. I realize I should probably get a financial advisor but I also don't know where/how to start that process either, or how to find someone I trust.
Thanks again for any help/insight you guys can provide.
Submitted June 19, 2022 at 01:07AM by HardatAdulting https://ift.tt/Dkr5Q1t
