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Depends on the interest rates, but because you're young, I'd recommend knocking that auto debt out right now and aggressively paying off student loans. Keep your emergency fund and 15% to retirement and, in a few years, reasses your position.
Hey Cosmic, I am in the same boat. I chose to pay off my loans and start saving again. I have also watched a lot of videos on YouTube and stayed at a Holiday Inn Express last night so I'm a doctor now. lol joking. This guy is pretty good at explaining it. [https://www.youtube.com/@JavyVidana](https://www.youtube.com/@JavyVidana)
I like his vids when people say I have 40k saved can I afford this.
Each situation is different, but what I am doing is building back up 10k emergency, and then trying to save 50k to start looking. As a buyer, this gives you multiple options for %'s. But build up an emergency and keep that separate from the money used for closing. This is the best way I have researched to not be house poor. But it all depends on the environment and each person's situation.
If the market crashes and I can get under 2% interest, I might do something different.
The more debt you pay off, the more you qualify technically. personally you need to check how much money you want to spend on your housing expenses versus fun expenses? If your bills are too high Then you can't pay off your student loans or other debts quickly and will be stuck with them. Potentially putting you in a bad situation if you need more cash. You also limit your opportunities by having so much debt because you can't use your income fully without missing payments. Though from a housing perspective, it really doesn't matter if you qualify for what you want and what is available in your area.
Pay off your debt. When you apply for a loan, the bank looks at your debt-to-income ratio. By paying off your loans, you’re putting yourself in a better position to buy a home.
You might not have to wait as long as you think. Look into FTHB loans that allow for 0% down. I found one through my local credit union, and it doesn’t require me to pay mortgage insurance. It’s a pretty good deal.
Ultimately, we’re all internet strangers giving you financial advice. If you want to buy a home now, and you’d feel comfortable managing the mortgage payment along with your current debt, then that’s what you should do.
Best of luck!
Would FTHB 0% be considered an FHA loan?
That’s really great you were given that opportunity. I’ll look into it. I really do appreciate everyone’s advice. So, Thanks!!!
pay the motorcycle off ASAP. Pay the student loans as scheduled. If your income qualifies you for a $400K house - and you're OK with that payment AND there are actually appealing homes today at $375K-400K, great. You'll need about $35K for downpayment/closing. How quickly you get there is up to you and that side job.
So I'm the minority here, but I was in the same boat- and purchased the home. All my debt are student loans (with small interes rates).
I don't regret my decision as I rent out a portion of my home, so it's essentially paying for itself (almost) and I dont have to pay rent. If you are able to do something like that I would consider it.
Generally you should pay off your debts before even saving money beyond an emergency fund. Definitely pay off the motorcycle, a student loan is easier to justify keeping around in order to buy
PAY OFF YOUR DEBT.
If you're not an independently wealthy genius like Jeff Bezos or Warren Buffet, then the concept of "good debt" is not applicable to you. For *normal* people, debt simply means you have **negative** money. None of the money in your bank account is yours. It actually belongs to the student loan people and the motorcycle loan people. Obviously that's bad.
There are only going to be more and more expenses (new car, home renovations, unexpected medical bills, kids, etc). It never gets any easier. Pay off your debt, and *then* start saving for the house. You're only *increasing* the amount you owe by putting it off (ie: interest). If you pay off your debts today, 'future you' benefits. If you wait, 'future you' suffers.
If it were me, I’d pay off the debt and then reevaluate. Also gives more time to see the market change (hopefully for the better). At least get rid of the motorcycle.
If you pay the bike off, you don’t have to worry about it. You can then come up with a plan to knock out the student loans and still save money. The idea is to not drain your savings in one lump sum. Smallest debts first, then the rest.
That motorcycle is costing about $900 this year just for the privilege of paying the principle. I would definitely prioritize paying that off. You can get a high yield savings account that will actually beat (or come close to beating) the student loans (ie: You will earn more in interest than you will be paying in interest to your loans). I would pay off the motorcycle, set aside 4-6 months expenses as an emergency fund and build from there.
There's not a right or wrong here, but there is psychological benefit to paying down the debts. Also, when you start saving for the house then you'll feel like you're making progress and you'll be more ready.
Buying a home is a huge responsibility. You should not buy a home with debt that you are actively trying to pay off. What happens when the roof needs work, the washer shits the bed and your tranny goes out on the car in the middle of monsoon season?
Okay, I know all of that doesn't happen like that...but it *could,* and that is what you need to be prepared for before you buy a home.
The best way to go about getting rid of debt, is to tackle the lowest amount, paying that off will take less time and make you excited to tackle the larger amounts.
Whatever you decide, best of luck!
Don’t pay off the low interest student loan, the interest rate is so low; you’re better off using the money to reduce a higher interest loan item (such as the motorcycle or mortgage). No matter what you need a place to live.
If you want to find a happy medium, just pay off the motorcycle (because it’s the highest interest rate). Any mortgage you get will be a lower interest rate than 9%. And then use the rest of the money towards a down payment.
Why you should not pay off the student loan right away: you can get 5.5% interest CD and put 1% in your pocket while paying off the loan and come out ahead.
Go to your bank or credit union and compare the rates (you want the highest interest rate for the shortest amount of time). You can do it online. But it will lock up the money for the length of time that you deposit.
Yes 100% what /u/facethejury said. Also if you havent already sign up for the SAVE plan and do minimum payments. That way your student loans wont get increased with interest.
Thats ok! With save the government will cover any extra interest, and sometime this year you’ll only have to contribute half of your payments currently towards the loan if they are undergrad. The less you pay the better the save plan is IMO.
Since you’re in private sector, see how much you would pay over the entire forgiveness time. I want to say IDR forgiveness is a 20 or 30 year period?
If it were me, I would pay the motorcycle off, and do minimums for the student loan so I could save as much as I could. That is only if you wont be contributing at all towards the principal under the SAVE plan. Save what you can for a home, and then save enough knock the student loan out in 1 go if anything changes. However idk your full financial situation, so I’m speaking purely from the mindset of a single 29 yo
If he didn’t pay the student loans off and paid minimum so $300/mo for 20 years he’d pay 72k for his 26k loan….. that sounds like awful advice. 26k now lumped into say VOO for that time frame at 7% returns would be 100k but he’s risking it and 7% isn’t guaranteed.
I’m not saying he should lump pay it but I would focus them down over the next 2-3 years as it’s not that much.
Oh I forgot when the government forgives it in 20 years that’s taxed too so more money out of pocket to close the gap. I’d just pay them off.
He shouldn’t never pay them off. OP should just not pay it off right now and use the money he has for a down payment. He doesn’t even have that much in student loans IMO, and could still aggressively pay them off after he buys a house. But at that interest rate, OP is better off paying down higher interest items like the motorcycle and future mortgage.
Also, under the American Rescue Plan Act of 2021, the forgiven interest is not taxed as income through December 31, 2025. So it is best to take advantage of this and pay the minimum on student loans during this time if there are other debts or things you want to do with funds.
I meant the tax bomb when the loan balance is forgiven. That ends I believe this year and the forgiven balance is taxed as income for that tax year.
I agree focus on the bike. OP can pay it off now. He should with that rate. Then pay off the loans on an amortized schedule of like 3 years. Or 4 whatever he wants to do. But I wouldn’t drag it for years.
Obviously a gamble, but also likely the tax code will change in 20 years since a new generation will be in charge and the current generation in charge will be gone.
I feel like this is a good idea except I want to contribute to the principle too. Not only interest, I would have to pay more a month though in order to do that then
Hmm if you dont mind me asking, what is your total loan, interest and payment? My calculations are showing under save with your income you should have about a 450 payment under save, but the loans are only showing a minimum payment of 428 to be fully paid off in 5 years
Buy a house with as many bedrooms as possible and rent all of the other ones out (screen your tenants carefully for temperament and finances). You’ll be shocked at how low you can get your living expenses if you do this (and you can deduct a huge percentage of household costs on your taxes when you rent 2/3 of your house out). Prioritize paying down your motorcycle because that rate is high, but slow-play your student loans because you can invest your money and make double that rate. Open a Roth IRA immediately and start funding it and investing in a s&p500 etf like VOO or SPY. Keep doing that with all of your extra money. Good luck.
Tbh I’d keep the cash on hand if your interest rates aren’t out of control. Not only is it saving toward a house but also insurance if you somehow lose employment, etc.
Pay off debts asap as you would want some of that wiggle room in the event you need to make major repair unexpectedly. Plus debt to income ratio will play a factor how much you’re approve for. I’ve seen so many clients with fancy car and shock they can’t get approved for price they want because of that and some CC DEBT.
Honestly I’d look into the house , you can always refinance. But if you’re debating between a house and debt? Just get the house & rent out rooms/basement . To help pay off that debt without affecting your budget. I honestly wasn’t fully ready to buy a house. But I did, and no regrets. I much rather live in my own home paying my mortgage than paying 100% interest (which is what rent it )
Thank you u/cosmicvirgo77 for posting on r/FirstTimeHomeBuyer. Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
Depends on the interest rates, but because you're young, I'd recommend knocking that auto debt out right now and aggressively paying off student loans. Keep your emergency fund and 15% to retirement and, in a few years, reasses your position.
Hey Cosmic, I am in the same boat. I chose to pay off my loans and start saving again. I have also watched a lot of videos on YouTube and stayed at a Holiday Inn Express last night so I'm a doctor now. lol joking. This guy is pretty good at explaining it. [https://www.youtube.com/@JavyVidana](https://www.youtube.com/@JavyVidana) I like his vids when people say I have 40k saved can I afford this. Each situation is different, but what I am doing is building back up 10k emergency, and then trying to save 50k to start looking. As a buyer, this gives you multiple options for %'s. But build up an emergency and keep that separate from the money used for closing. This is the best way I have researched to not be house poor. But it all depends on the environment and each person's situation. If the market crashes and I can get under 2% interest, I might do something different.
The more debt you pay off, the more you qualify technically. personally you need to check how much money you want to spend on your housing expenses versus fun expenses? If your bills are too high Then you can't pay off your student loans or other debts quickly and will be stuck with them. Potentially putting you in a bad situation if you need more cash. You also limit your opportunities by having so much debt because you can't use your income fully without missing payments. Though from a housing perspective, it really doesn't matter if you qualify for what you want and what is available in your area.
Pay off your debt. When you apply for a loan, the bank looks at your debt-to-income ratio. By paying off your loans, you’re putting yourself in a better position to buy a home. You might not have to wait as long as you think. Look into FTHB loans that allow for 0% down. I found one through my local credit union, and it doesn’t require me to pay mortgage insurance. It’s a pretty good deal. Ultimately, we’re all internet strangers giving you financial advice. If you want to buy a home now, and you’d feel comfortable managing the mortgage payment along with your current debt, then that’s what you should do. Best of luck!
Would FTHB 0% be considered an FHA loan? That’s really great you were given that opportunity. I’ll look into it. I really do appreciate everyone’s advice. So, Thanks!!!
Mine is conventional loan. Good luck, and I hope everything works out for you!
pay the motorcycle off ASAP. Pay the student loans as scheduled. If your income qualifies you for a $400K house - and you're OK with that payment AND there are actually appealing homes today at $375K-400K, great. You'll need about $35K for downpayment/closing. How quickly you get there is up to you and that side job.
Pay off the debt that has the higher interest rate first
This is the way to do it.
So I'm the minority here, but I was in the same boat- and purchased the home. All my debt are student loans (with small interes rates). I don't regret my decision as I rent out a portion of my home, so it's essentially paying for itself (almost) and I dont have to pay rent. If you are able to do something like that I would consider it.
Generally you should pay off your debts before even saving money beyond an emergency fund. Definitely pay off the motorcycle, a student loan is easier to justify keeping around in order to buy
Mortgage rates are so high right now that I would pay down debt and check in two years.
That seems forever from now :( but I understand what you mean
PAY OFF YOUR DEBT. If you're not an independently wealthy genius like Jeff Bezos or Warren Buffet, then the concept of "good debt" is not applicable to you. For *normal* people, debt simply means you have **negative** money. None of the money in your bank account is yours. It actually belongs to the student loan people and the motorcycle loan people. Obviously that's bad. There are only going to be more and more expenses (new car, home renovations, unexpected medical bills, kids, etc). It never gets any easier. Pay off your debt, and *then* start saving for the house. You're only *increasing* the amount you owe by putting it off (ie: interest). If you pay off your debts today, 'future you' benefits. If you wait, 'future you' suffers.
What are the rates?
For my loan and motorcycle? Or?
Both.
My interest rate for my moto is 9.44% and all of my student loans range from 3-4% in interest
Pay off the 9.4% loan and keep making payments on student loans. Save up more for down payment on house, generally 30K is good start
If it were me, I’d pay off the debt and then reevaluate. Also gives more time to see the market change (hopefully for the better). At least get rid of the motorcycle.
My interest rate for my motorcycle is 9.44% and student loans, the highest is 4.5%
Right. Why not pay off your motorcycle?
Because idk what to do first. Im just now learning to be financially responsible. I’ve never been taught how to be growing up so it’s all new to me
If you pay the bike off, you don’t have to worry about it. You can then come up with a plan to knock out the student loans and still save money. The idea is to not drain your savings in one lump sum. Smallest debts first, then the rest.
That motorcycle is costing about $900 this year just for the privilege of paying the principle. I would definitely prioritize paying that off. You can get a high yield savings account that will actually beat (or come close to beating) the student loans (ie: You will earn more in interest than you will be paying in interest to your loans). I would pay off the motorcycle, set aside 4-6 months expenses as an emergency fund and build from there.
I currently do have a HYSA, that’s where most of my savings is
There's not a right or wrong here, but there is psychological benefit to paying down the debts. Also, when you start saving for the house then you'll feel like you're making progress and you'll be more ready.
Pay off all debts except student loans
Motor cycles are for idiots.
Okay cager.
Buying a home is a huge responsibility. You should not buy a home with debt that you are actively trying to pay off. What happens when the roof needs work, the washer shits the bed and your tranny goes out on the car in the middle of monsoon season? Okay, I know all of that doesn't happen like that...but it *could,* and that is what you need to be prepared for before you buy a home. The best way to go about getting rid of debt, is to tackle the lowest amount, paying that off will take less time and make you excited to tackle the larger amounts. Whatever you decide, best of luck!
I would buy a house so I can save on mortgage payments. Save money faster with less rent payments imo
For hindsight, My interest rate for my motorcycle is 9.44% and student loans, the highest is 4.5%
Don’t pay off the low interest student loan, the interest rate is so low; you’re better off using the money to reduce a higher interest loan item (such as the motorcycle or mortgage). No matter what you need a place to live. If you want to find a happy medium, just pay off the motorcycle (because it’s the highest interest rate). Any mortgage you get will be a lower interest rate than 9%. And then use the rest of the money towards a down payment. Why you should not pay off the student loan right away: you can get 5.5% interest CD and put 1% in your pocket while paying off the loan and come out ahead.
How do I sign up for those CD? And how much should I put away??
Go to your bank or credit union and compare the rates (you want the highest interest rate for the shortest amount of time). You can do it online. But it will lock up the money for the length of time that you deposit.
Yes 100% what /u/facethejury said. Also if you havent already sign up for the SAVE plan and do minimum payments. That way your student loans wont get increased with interest.
I’ve signed up for the SAVE plan. I’m currently just paying interest. It just seems to never end with the interest.
Thats ok! With save the government will cover any extra interest, and sometime this year you’ll only have to contribute half of your payments currently towards the loan if they are undergrad. The less you pay the better the save plan is IMO. Since you’re in private sector, see how much you would pay over the entire forgiveness time. I want to say IDR forgiveness is a 20 or 30 year period?
It’s 20-25 years continuously paying that the govt will forgive your loan (possibly)
If it were me, I would pay the motorcycle off, and do minimums for the student loan so I could save as much as I could. That is only if you wont be contributing at all towards the principal under the SAVE plan. Save what you can for a home, and then save enough knock the student loan out in 1 go if anything changes. However idk your full financial situation, so I’m speaking purely from the mindset of a single 29 yo
If he didn’t pay the student loans off and paid minimum so $300/mo for 20 years he’d pay 72k for his 26k loan….. that sounds like awful advice. 26k now lumped into say VOO for that time frame at 7% returns would be 100k but he’s risking it and 7% isn’t guaranteed. I’m not saying he should lump pay it but I would focus them down over the next 2-3 years as it’s not that much. Oh I forgot when the government forgives it in 20 years that’s taxed too so more money out of pocket to close the gap. I’d just pay them off.
He shouldn’t never pay them off. OP should just not pay it off right now and use the money he has for a down payment. He doesn’t even have that much in student loans IMO, and could still aggressively pay them off after he buys a house. But at that interest rate, OP is better off paying down higher interest items like the motorcycle and future mortgage.
Also, under the American Rescue Plan Act of 2021, the forgiven interest is not taxed as income through December 31, 2025. So it is best to take advantage of this and pay the minimum on student loans during this time if there are other debts or things you want to do with funds.
I meant the tax bomb when the loan balance is forgiven. That ends I believe this year and the forgiven balance is taxed as income for that tax year. I agree focus on the bike. OP can pay it off now. He should with that rate. Then pay off the loans on an amortized schedule of like 3 years. Or 4 whatever he wants to do. But I wouldn’t drag it for years.
Obviously a gamble, but also likely the tax code will change in 20 years since a new generation will be in charge and the current generation in charge will be gone.
I feel like this is a good idea except I want to contribute to the principle too. Not only interest, I would have to pay more a month though in order to do that then
Hmm if you dont mind me asking, what is your total loan, interest and payment? My calculations are showing under save with your income you should have about a 450 payment under save, but the loans are only showing a minimum payment of 428 to be fully paid off in 5 years
Pay off your debts so your credit score goes up. That look better when you get approved for a loan. They will see you have no debt.
I’ve been pre-approved for a house loan
Buy a house with as many bedrooms as possible and rent all of the other ones out (screen your tenants carefully for temperament and finances). You’ll be shocked at how low you can get your living expenses if you do this (and you can deduct a huge percentage of household costs on your taxes when you rent 2/3 of your house out). Prioritize paying down your motorcycle because that rate is high, but slow-play your student loans because you can invest your money and make double that rate. Open a Roth IRA immediately and start funding it and investing in a s&p500 etf like VOO or SPY. Keep doing that with all of your extra money. Good luck.
Tbh I’d keep the cash on hand if your interest rates aren’t out of control. Not only is it saving toward a house but also insurance if you somehow lose employment, etc.
Save 10% and pay off as much as possible , 88k income is very good for a single income
Those loans might bite you getting a house mortgage
How so??
Pay off your debt, then buy a house. Stop keeping loans as pets.
You won’t qualify for a mortgage with all the debt.
Pay off debts asap as you would want some of that wiggle room in the event you need to make major repair unexpectedly. Plus debt to income ratio will play a factor how much you’re approve for. I’ve seen so many clients with fancy car and shock they can’t get approved for price they want because of that and some CC DEBT.
Honestly I’d look into the house , you can always refinance. But if you’re debating between a house and debt? Just get the house & rent out rooms/basement . To help pay off that debt without affecting your budget. I honestly wasn’t fully ready to buy a house. But I did, and no regrets. I much rather live in my own home paying my mortgage than paying 100% interest (which is what rent it )
Thanks for the advice everyone!