still hesitant about buying because of student loan debt but found a forclosure . . .

Asked by Jennifer Kuhlemeyer, 55106 Fri Dec 26, 2008

I found a forclosed house for 80,000 in nearly move-in condition. Its market value is almost twice as much. I make 3700 gross per month but have 500 per month in student loan payments (40,000 balance). Not sure if I can afford even though my mortgage broker has pre-approved me for a loan up to 200,000. Do I dare take on more debt to gain equity?

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Cameron Piper, Agent, Forest Lake, MN
Sat Dec 27, 2008

The factors that many of us took into account when telling you not to buy a house before are still there. I understand what it is like to want to move into a house right away.

I also know what it is like to work two jobs to support the bills. I have a client who was working two jobs five years ago and they bought a house on an emotional whim (regardless of our council). The husband called me a couple of months ago after being laid off and told me that they were in a panic and needed to sell. We talked about their situation and thankfully they have equity, but now need to part with their dream home because they got emotional and bought something that they shouldn't.

He really has three choices now.

-Lose the house they love to foreclosure
-Work three jobs until he can find good full time work
-Sell, but do so with an aching heart because they love their house.

No matter what happens you will need to work two jobs for the next thirty years just to keep the ball rolling, and if something should happen (job loss, injury, etc.) you are stuck in a terrible position. It has little to do with your income but more to do with your overall situation. There is no doubt that you qualify for a loan, but I wonder if you asked each of the people who are in foreclosure right now (who also QUALIFIED for their loans) whether it was worth it or not, what they would tell you.

My advice is to get off the emotional train, stop looking at houses and start finding the cheapest apartment you can tolerate. Once you move in, work as much as you can and pay off your debt as quickly as possible. Once you are debt free save up a downpayment (20%) and then buy a house. This may be old school conservative advice but very few of the people follow it find themselves in mortgage trouble.

By the way - there will be good deals then too.

Good Luck!!

Cameron Piper
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Luke, , Nashville, TN
Sat Dec 27, 2008

Please pay special attention to Cameron Piper's post. He makes extremely good points in his analysis. Thumbs up from me for Mr. Pipers post.
0 votes
Brad Anderson, Agent, Maple Grove, MN
Sat Dec 27, 2008
Jennifer, ask your mortgage broker to help you figure out your budget. If you are paying rent now, how much more is it going to cost to own? You will have a tax benifit to owning. Check with your mortgage broker, or someone you trust. If you need any help, contact me. Good luck.
Brad Anderson
0 votes
Jason Tangen, Agent, Sauk Rapids, MN
Sat Dec 27, 2008
There are many variables that one needs to consider prior to buying a home (how long are you going to stay in one location, is work stable, etc.). Make sure you are comfortable with your final decision.

With that being said, how much are you paying per month for rent? If your numbers are accurate, that $40K student loan is only 1/2 of the equity that you stand to gain at a price that is probably less per month than what you are already paying.

I recommend that you sit down with your real estate professional and go through the numbers in a little more detail.

Jason Tangen
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Susan Hoffla…, Agent, Shoreview, MN
Sat Dec 27, 2008
Don't do anything that's going to make you feel uncomfortable. Is it the monthly payment part that seems like too much? is it more than you're currently paying in rent? Crunch your numbers and if you just can't get excited about embarking on this new venture, then it's not a good idea. What you don't want is to get in to a monthly payment situation on top of the upkeep that comes with your own house. Your anxiety level will go through the roof. That house may sell, but there are always new houses coming on the market if that one sells before you feel ready. Good luck!!!
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