Loan question

[Ackj]

Yeah why does everyone think this is so easy. I had medical expenses, wedding, now kids. I pay as much as possible every month

Wants vs. needs. Medical stuff, okay, that's probably a need, unless it's like wisdom teeth or dermatology stuff, which can be put off. Getting married and knocked up? That is definitely not a necessity. Would I like to be married now? Sure, but we certainly can't afford it, so we're waiting. Budgeting for a child? If everyone did that our social safety net systems would be far less utilized.

I understand everyone has different priorities and values. When's the last time you went out to eat? Aside from tonight, when I used a TGI Friday's gift card I got for Christmas, it was 3-4 weeks ago when I went to Moes and spent $12 for two. It drives me crazy to hear people say they're broke, they're spending all they have, can't spare anything, but are regularly blowing money on coffee every morning, new smartphone, new wardrobe, going out to eat, etc.

This isn't directed at anyone in particular, but just my rant on people's financial woes in general. But I guess it's fine, people blowing money gets means businesses are turning a profit on them, so it's good for the economy.

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[SHC1984]

I cannot believe even one person who is old enough to graduate pharmacy school would even consider living at home. Be an adult. Grow up. Stop mooching off your parents. You can afford to pay rent, so DO IT.

What living at home really saves you is from ever having a girlfriend/boyfriend. I would NEVER date anyone who had a Pharm.D and still lived with their parents. Ew. Cut the apron strings.

My parents live in a very beautiful 6500 sq ft house. I would love to live in it!

No one is saying that you should live with your parents when you are a pharmacist. It's only recommended if you get very unlucky and lose your job and become unemployed.

Moving back home with your parents is always an option for everyone if they happen to have a misfortune and become unemployed. Of course you don't do it if you have a job.

Credit card is ok for very short term. But not ok for months of unemploment. You need at least 6 months of living expenses saved up. This fund has to be liquid enough and carry NO extra baggage when you use it (no interest, penalty, etc). Some people use salary, for me 6 mo salary is simply too large ($45k) when my monthly expense is only $1500 max, avg $1100 now, will be $3000 in the future. I have 8 mo expenses in the form of Ibond (tracks inflation), no penalty Ally high yield CD, and short term saving accounts. The rest of the money goes to stocks/bond allocation.

I am going to max out my 401K and ROTH IRA when I start working...but I am also going to be paying back my loans ASAP. My loans are at 6.8%....emergency funds sit in 1% to 2% saving account...so it's really dumb for anyone with LOANS to keep a big emergency fund.

If you DO NOT have any student loans...then YES, keep a large fund that covers 6 to 8 months of living expenses....but if you have student loans..I would keep 3K cash on you...and the rest should be used to pay back your student loans at 6.8%.

If I have an emergency I would use my credit card and pay it back before the interest hits....if it's a BIG emergency I can always move back home with my parents and they will pay off my credit cards for me...BUT THATS WORST case scenrio...Hopfully none of that will ever happen.

 

[confettiflyer]

What are you talking about? Of course there will be changes. No bill passes both houses of Congress without modification. I don't think you understand the legislative process.

I personally give this bill a slim chance of making it out of committee. Most bills never do.

Agreed. It's like <13%. Hell, we can't even pass legislation to avert a virtually guaranteed recession given a 1yr notice.

I don't think BM understands a lot of things we talk about given the different conclusions we draw from the same source material. Keeps us entertained.

 

[BMBiology]

Agreed. It's like <13%. Hell, we can't even pass legislation to avert a virtually guaranteed recession given a 1yr notice.

I don't think BM understands a lot of things we talk about given the different conclusions we draw from the same source material. Keeps us entertained.

I am also entertained. Some people here think they are financially smart and know how to avoid paying taxes but yet, they are so much in debt.

 

[BMBiology]

I am going to max out my 401K and ROTH IRA when I start working...but I am also going to be paying back my loans ASAP. My loans are at 6.8%....emergency funds sit in 1% to 2% saving account...so it's really dumb for anyone with LOANS to keep a big emergency fund.

If you DO NOT have any student loans...then YES, keep a large fund that covers 6 to 8 months of living expenses....but if you have student loans..I would keep 3K cash on you...and the rest should be used to pay back your student loans at 6.8%.

That's what I did. Remember you can withdraw the money you put in your roth IRA without any penalty. You can also borrow from your 401 k. I don't particularly recommend borrowing from your retirement fund but if you are young, healthy, don't have a kid or mortgage then it may be a risk worth taking.

 

[confettiflyer]

I am also entertained. Some people here think they are financially smart and know how to avoid paying taxes but yet, they are so much in debt.

Ah but reading comprehension is fundamental. I don't know what's worse, being in debt...or rattling off random thoughts on government pilfered from talk radio and not understanding how things actually work.

 

[BMBiology]

Ah but reading comprehension is fundamental. I don't know what's worse, being in debt...or rattling off random thoughts on government pilfered from talk radio and not understanding how things actually work.

Yes, especially when you get your amount due. Read it carefully now.

 

[BMBiology]

I am not talking about politics. I am talking about the numbers. Obama wants to raise taxes for couples making > $250,000. That would raise $40-50 billion for the first year. The republicans rejected the idea. They are willing to risk the health of the economy over $40-50 billion.

The government is $16 trillion in debt and counting. Barclays estimates that IBR will cost the government $190 billion from now to 2020: http://finance.yahoo.com/news/student-debt-americas-1-trillion-153953849.html

Do you really think the government won't scale down IBR? And if they do, who are they going to target first? Well paid professionals with a lot student loans would be my guess. I don't know if it would only affect new borrowers or when this would happen but I wouldn't count on the government on this one.

 

[Sure2Pass]

45k/year is not so much, use your brain. I know people working only 40h/week paid 75k/year living at home.

Hmm... 45 k year is not so much........... I'm still thinking. Trying really hard not to say something mean. I'll just be fair. 45 k a year, Okay, lots of peoples homes cost 200k. 45 k a for roughly 6 years will pay that off... but hmm, why don't they have 6 year mortgages? Why is 30 year and 15 year mortgage the standard? Where is the 6 year mortgage that you speak of being so common and normal at? Jeez. Douche. Just because your mommy and daddy pay everything doesn't means everyone elses does. Don't shove your opinions on people. And the reason you're speaking of people who paid 75 k a year is because it's abnormal. Thats our salary after taxes. Imbecile! "...Use your brain."

 

[Its Z]

I can't say who but there's an sdn poster with no loans.... Paid school working part time stripping.

 

[BMBiology]

I can't say who but there's an sdn poster with no loans.... Paid school working part time stripping.

dont tell my mom!

 

[SHC1984]

Hmm... 45 k year is not so much........... I'm still thinking. Trying really hard not to say something mean. I'll just be fair. 45 k a year, Okay, lots of peoples homes cost 200k. 45 k a for roughly 6 years will pay that off... but hmm, why don't they have 6 year mortgages? Why is 30 year and 15 year mortgage the standard? Where is the 6 year mortgage that you speak of being so common and normal at? Jeez. Douche. Just because your mommy and daddy pay everything doesn't means everyone elses does. Don't shove your opinions on people. And the reason you're speaking of people who paid 75 k a year is because it's abnormal. Thats our salary after taxes. Imbecile! "...Use your brain."

People can live on 15K to 20K a year easily without children and mortgage payments. So paying 45K or 75K a year on a pharmacist salary is very easy if you live on 15K to 20K a year. That would be the smart thing to do.

However you can also choose to have children at a very young age and buy a house you can't afford too...if you do that then it will be very hard to pay off your loans...but that's not the smartest thing to do.

People that have trouble paying off their loans make not so smart choices and thats what happens.

Momus is the BEST with money. The user has over a million dollars and is my age, so people should learn to be more like him.

I can't say who but there's an sdn poster with no loans.... Paid school working part time stripping.

Corpseman? He said he doesn't have loans...

Either your parents pay for your tuition or you strip for it!

A user message me and told me she has a sugardaddy that pays for all her stuff. Not saying who this is either. She gets 15K a month from her sugardaddy. She was the one that recommended that I start using SeekingMillionaires.com I did but I can't go thru hooking up with a 50 yo nasty old man.

 

[SHC1984]

That's what I did. Remember you can withdraw the money you put in your roth IRA without any penalty. You can also borrow from your 401 k. I don't particularly recommend borrowing from your retirement fund but if you are young, healthy, don't have a kid or mortgage then it may be a risk worth taking.

I would borrow money from my parents before borrowing from my retirement fund. Borrowing from parents = NO interest/NO penalities/NO late fee.

 

[BMBiology]

I would borrow money from my parents before borrowing from my retirement fund. Borrowing from parents = NO interest/NO penalities/NO late fee.

just move back home and live in your parents' mansion!

 

[confettiflyer]

I can't say who but there's an sdn poster with no loans.... Paid school working part time stripping.

Clearly that wasn't me

Yes, especially when you get your amount due. Read it carefully now.

I am not talking about politics. I am talking about the numbers.

The government is $16 trillion in debt and counting. Barclays estimates that IBR will cost the government $190 billion from now to 2020: http://finance.yahoo.com/news/studen...153953849.html

Do you really think the government won't scale down IBR?

You should read Krugman's column in NYT. He's a total liberal but he got the Nobel Prize in economics and he's usually right. The debt #'s are the way they are because of the recession, not necessarily because we're spending too much (he argues we're not counterspending enough). The whole austerity thing you're talking about is so 2009...heck even that Petri bill we discussed earlier will probably cost taxpayers *more* money in the long run (I eagerly await GAO #'s if that thing ever hits the floor) .

I'd summarize more but I don't want to reinvent the wheel, just read it and try not to come up with another opposite/out of left field conclusion again.

 

[Momus]

Hmm... 45 k year is not so much........... I'm still thinking. Trying really hard not to say something mean. I'll just be fair. 45 k a year, Okay, lots of peoples homes cost 200k. 45 k a for roughly 6 years will pay that off... but hmm, why don't they have 6 year mortgages? Why is 30 year and 15 year mortgage the standard? Where is the 6 year mortgage that you speak of being so common and normal at? Jeez. Douche. Just because your mommy and daddy pay everything doesn't means everyone elses does. Don't shove your opinions on people. And the reason you're speaking of people who paid 75 k a year is because it's abnormal. Thats our salary after taxes. Imbecile! "...Use your brain."

I'll play... 75k is because they are living with their parents, but for 45k/year that's attainable. I saved around 100k/year for the last 4 years, and spent around $15k/year. Parents paid my tuition yes... but let's see... if I had 200k loan, I'd pay that 3 times over already in less than 5 years. Maybe, you should learn how to budget better than me before talking **** to me.

Your take home is 80k/year... if you think you can not save 45k and get by with $35k/year, you are a ***** who spends too much. Oh wait... You have many kids, a big $40k wedding, and crazy monthly mortgage payment? That's your life choice and really not my problem if you can't pay your loan in reasonable amount of time.

Median HOUSEHOLD (2 people, possibly with 1-2 kids) income is 50k, and that's why average house price is around 200k and it takes average family 30 years to pay it off. On the other hand, a SINGLE pharmacist makes $125k, thus can save more than an average family. If you have a spouse who is not a dead beat bringing another 50k, your income just jumps to 175k/household (vs. average household income 50k). They do not have 6 years mortgage because lenders do not cater to singles making 125k, they cater to average family making 50k. Bringing this up is not giving you any point. To quote yourself "Imbecile!...Use your brain."

 

[Sure2Pass]

I'll play... 75k is because they are living with their parents, but for 45k/year that's attainable. I saved around 100k/year for the last 4 years, and spent around $15k/year. Parents paid my tuition yes... but let's see... if I had 200k loan, I'd pay that 3 times over already in less than 5 years. Maybe, you should learn how to budget better than me before talking **** to me.

Your take home is 80k/year... if you think you can not save 45k and get by with $35k/year, you are a ***** who spends too much. Oh wait... You have many kids, a big $40k wedding, and crazy monthly mortgage payment? That's your life choice and really not my problem if you can't pay your loan in reasonable amount of time.

Median HOUSEHOLD (2 people, possibly with 1-2 kids) income is 50k, and that's why average house price is around 200k and it takes average family 30 years to pay it off. On the other hand, a SINGLE pharmacist makes $125k, thus can save more than an average family. If you have a spouse who is not a dead beat bringing another 50k, your income just jumps to 175k/household (vs. average household income 50k). They do not have 6 years mortgage because lenders do not cater to singles making 125k, they cater to average family making 50k. Bringing this up is not giving you any point. To quote yourself "Imbecile!...Use your brain."

Conversation over.... "Parents paid my tuition yes" Hush kid. I didn't even read the rest of your crap after that. If, how, when, what if, blah blah just hush. You can't understand 90% of us if your school was paid off by your parents. You sound like Mitt Romney trying to tell a kid from south side of Chicago how to make it out of the hood.

 

[cycloketocaine]

Conversation over.... "Parents paid my tuition yes" Hush kid. I didn't even read the rest of your crap after that. If, how, when, what if, blah blah just hush. You can't understand 90% of us if your school was paid off by your parents. You sound like Mitt Romney trying to tell a kid from south side of Chicago how to make it out of the hood.

You sure are a bitchy thing for someone who only has 4 posts.

 

[SHC1984]

just move back home and live in your parents' mansion!

Can I find a boyfriend if I do though?

 

[Momus]

Conversation over.... "Parents paid my tuition yes" Hush kid. I didn't even read the rest of your crap after that. If, how, when, what if, blah blah just hush. You can't understand 90% of us if your school was paid off by your parents. You sound like Mitt Romney trying to tell a kid from south side of Chicago how to make it out of the hood.

That's a phrase little pussi3s use when they can't win an argument with a real counterpoint.

 

[SHC1984]

I'll play... 75k is because they are living with their parents, but for 45k/year that's attainable. I saved around 100k/year for the last 4 years, and spent around $15k/year. Parents paid my tuition yes... but let's see... if I had 200k loan, I'd pay that 3 times over already in less than 5 years. Maybe, you should learn how to budget better than me before talking **** to me.

Your take home is 80k/year... if you think you can not save 45k and get by with $35k/year, you are a ***** who spends too much. Oh wait... You have many kids, a big $40k wedding, and crazy monthly mortgage payment? That's your life choice and really not my problem if you can't pay your loan in reasonable amount of time.

Median HOUSEHOLD (2 people, possibly with 1-2 kids) income is 50k, and that's why average house price is around 200k and it takes average family 30 years to pay it off. On the other hand, a SINGLE pharmacist makes $125k, thus can save more than an average family. If you have a spouse who is not a dead beat bringing another 50k, your income just jumps to 175k/household (vs. average household income 50k). They do not have 6 years mortgage because lenders do not cater to singles making 125k, they cater to average family making 50k. Bringing this up is not giving you any point. To quote yourself "Imbecile!...Use your brain."

Do you recommend everyone MAX out their 401K and Roth IRA?

The book I am reading now called Smart Couples Finish Rich by David Bach recommends that.

Also do you prefer the Roth 401K or the traditional 401K?

I am thinking Roth is better than traditional. What is your opinion on that

Do you have your Roth 401K and Roth IRA maxed out?

 

[SHC1984]

Conversation over.... "Parents paid my tuition yes" Hush kid. I didn't even read the rest of your crap after that. If, how, when, what if, blah blah just hush. You can't understand 90% of us if your school was paid off by your parents. You sound like Mitt Romney trying to tell a kid from south side of Chicago how to make it out of the hood.

My parents didn't pay for my P2, P3 or P4 year. And I agree with what Momus said.

200K student loans= You need to live frugally for a few years to pay off that debt.

200K student loans + have BABIES + buy a house = FAILURE

 

[rxlea]

The name calling doesn't do anything for your arguments on either side. Just sayin'...

 

[rxlea]

My parents didn't pay for my P2, P3 or P4 year. And I agree with what Momus said.

200K student loans= You need to live frugally for a few years to pay off that debt.

200K student loans + have BABIES + buy a house = FAILURE

Unless you're a single mom with a medicaid baby

 

[SHC1984]

Unless you're a single mom with a medicaid baby

If I can't find a job or a rich husband then my plan is to have 5 medicaid babies and live off the government for the rest of my life. With 5 medicaid babies I can afford anything I want.

With all of Obama's new policies and increase in taxes to fund the lazy I am sure I can NOT work and live nicely for the rest of my life!

 

[Momus]

Do you recommend everyone MAX out their 401K and Roth IRA?

The book I am reading now called Smart Couples Finish Rich by David Bach recommends that.

Also do you prefer the Roth 401K or the traditional 401K?

I am thinking Roth is better than traditional. What is your opinion on that

Do you have your Roth 401K and Roth IRA maxed out?

I do max 401k and max back door Roth IRA. If you can afford them, do both for tax diversification. If the gov increases income tax rate in the future, 401k (traditional) sucks, and withdrawing from a ROTH is good (already paid taxes). If the gov decreases income tax rate in the future, ROTH sucks, withdrawing from 401k is good (paying lower taxes). Having both is like having a small insurance that guarantees you have another bucket of money to withdraw from irregardless of tax rate.

Read in order:
I will teach you how to be rich
Millionaire teacher
Boglehead guide to investing
A random walk down Wall Street

If you finish all 4 books, you will know more about investing than 99% of the general population.

 

[BMBiology]

Can I find a boyfriend if I do though?

Who doesn't want to marry someone who comes from a well off family!

 

[Sure2Pass]

My parents didn't pay for my P2, P3 or P4 year. And I agree with what Momus said.

200K student loans= You need to live frugally for a few years to pay off that debt.

200K student loans + have BABIES + buy a house = FAILURE

Was directed more @ Momus, but same to you, you can't really try to make a guide to someone's life unless you're living in their situation or have been there.

That's a phrase little pussi3s use when they can't win an argument with a real counterpoint.

That's a nice come back. I guess you win the debate. Your point in setting standards of people for how they choose to spend their money is an extraordinary fail. I can tell you grew up in the suburbs and your parents planned your life, so speak on behalf of those people, not the majority. You don't know others situations, and I don't think you're worth explaining a complex situation like some of ours. 1% applying rules to the 99%.. GTFOH.

You sure are a bitchy thing for someone who only has 4 posts.

Yea Yea, I'm speaking up for all those who feel how I feel. But trust me, I've utilized SDN faithfully longer than the majority of you, going back to 2005, even so, freedom of speech is still in style even in 2013 .

 

[BMBiology]

200K student loans + have BABIES + buy a house = FAILURE

That is exactly right. You can't expect to have everything in life on a pharmacist's salary. With 200K in student loan, you are not financially better than someone who makes 45K year and doesn't have any debt.

 

[Transformer]

I would still build up a fund so you won't have to rely on cards. Although, when I got accepted to pharmacy school I applied and was approved for a credit card that had an introductory no interest period. I put a lot of my fees on it and then paid it off before interest kicked in on my account. I do try to keep enough money in my bank account though to where I can make my car payment and other payments for at least 3 months. It's ultimately up to you though. It's good that you have no credit card debt.



With kids I think it's especially important to have at least 6 months saved up. My goal is to have a job lined up before I graduate (hopefully a residency). If I don't do a residency and start working I think I'll probably make high student loan payments during the 6 month post-grad grace period (I may be wrong, but I don't think the interest compounds onto the loan until then). After that I would put money into a savings account little by little until I have 6 months worth of living expenses banked. My parents raised me to save money and had a very similar savings plan that you do. They had a savings account and tried to keep at least 6 months worth of money there just in case something happened. As a kid we did have some financial hardships and the savings really did help my family. You never know when your car breaks down and needs a few hundred/thousands in repairs, when an important appliance goes out or if someone has a medical emergency.

Most of my federal school loans started accruing interest immediately during my P1 year. Working various Intern jobs, I've paid a good amount of interest during school and manage to save up at least 3 months worth of living expenses.

I think with having one kid, you need at least a year worth of money saved up!

 

[BMBiology]

I can tell you grew up in the suburbs and your parents planned your life, so speak on behalf of those people, not the majority. You don't know others situations, and I don't think you're worth explaining a complex situation like some of ours. 1% applying rules to the 99%.. GTFOH. .

My parents are the hardest working people I know. They didnt make much money and we were living in "poverty" but I did not care. I had a roof over my head and food in my stomach. I worked during pharmacy school and only borrowed what I actually needed. I paid off my student loans within a few years. It can be done but you have to make some sacrifices. Don't expect to live in a nice house and have two kids when you owe 200K in student loans.

That is the problem with some people. They are always looking for shortcuts and loopholes. These are usually the same people who are debt and have no idea how to pay it off.

 

[confettiflyer]

Don't expect to live in a nice house and have two kids when you owe 200K in student loans.

Oh God...do I have to lecture you again on how mortgages and DTI work?

 

[Digsbe]

Most of my federal school loans started accruing interest immediately during my P1 year. Working various Intern jobs, I've paid a good amount of interest during school and manage to save up at least 3 months worth of living expenses.

I think with having one kid, you need at least a year worth of money saved up!

It does, but I think it isn't compound interest, it only builds on the current amount and then gets tacked on after you graduate when you enter repayment. I'm hoping to work many hours during the summer to pay off some interest and reduce what I need to borrow.

 

[BMBiology]

Oh God...do I have to lecture you again on how mortgages and DTI work?

Have you ever gotten a mortgage before? It is not 2006 anymore. The standards have changed. Buy a nice house first and then get back to me. Btw, you remind me of my accountant friend. Always talking about money and tax loopholes so people think he is smart but can't seem to get out of debt.

 

[nguyenulm]

Momus, mommy and dadda paid for your tuition? Lol

 

[BMBiology]

I posted this before but of course, you know some loopholes around this. Try to get a mortgage in LA or SF and get back to us.

Ms. Sweet-Kostoplis and other industry experts say that many first-time buyers get turned down for mortgages because their student loan debt significantly raises their overall debt level. Most lenders follow underwriting guidelines that limit total debt payments &#8212; for the mortgage and property taxes, plus credit cards, student loans, car loans and other debts &#8212; to 45 to 50 percent of a borrower's adjusted gross income.

Assuming the mortgage and taxes will eat up 33 to 35 percent, that means student loan payments, plus credit card bills, can account for no more than 10 percent or so of gross income, Ms. Sweet-Kostoplis said. That equals $833 a month for someone who makes $100,000 a year.

http://www.nytimes.com/2012/04/29/realestate/mortgages-dealing-with-student-debt.html?_r=0

 

[confettiflyer]

I posted this before but of course, you know some loopholes around this:



http://www.nytimes.com/2012/04/29/realestate/mortgages-dealing-with-student-debt.html?_r=0

yeah the loophole is called...a down payment.

 

[confettiflyer]

Have you ever gotten a mortgage before? It is not 2006 anymore. The standards have changed. Buy a nice house first and then get back to me. Btw, you remind me of my accountant friend. Always talking about money and tax loopholes so people think he is smart but can't seem to get out of debt.

I'm repeating myself...go search for my old posts, i've answered this one before.

but the answer is yes because i'd originate them, and yes standards have changed...you're not getting 100% LTV's and 80/20 piggybacks anymore. I'm talking about trad. conforming 20% down in current market.... total debt does not matter.

just cuz you got a mortgage doesn't make you an expert at it.

 

[BMBiology]

I'm talking about trad. conforming 20% down in current market.... total debt does not matter.

How are you going to save for the 20% down payment for a $400-500K house when you have 200K in student loans? This is the average price for a house in SD, LA. I am not even talking about living in a nice part of LA or SD where it would cost at least 600K for a house. Don't even get me started about SF.

A4M- and yes, this does not apply to some dirt cheap rural area. I got it.

This thread is not about buying a house with a huge student loan debt so I will leave it as that.

 

[confettiflyer]

Because I like numbers and all of you a lot a lot, I made some "Back of the envelope calculations." Hope you can follow along.

Borrower characteristics
Income: $120,000 a year, single filer, no dependents.
Student loan debt: $200,000

Monthly gross income: $10,000
- Monthly IBR Payment: $1290 (source)
Remaining income: $8710

Hypothetical FHA maximum front-end DTI of 31% = $2700/mo (PITI) (source)

Median house price, Los Angeles County: $360,000 (11/2012 source)
Annual property tax (estimate): $3888 (1.08%, 1% county tax + estimated bonds and other misc. levies)

Impounded property tax: $324/mo​

(source)
Insurance (estimate): $900/yr ($75/mo) (source)

Hypothetical 30yr 4% loan ($288,000 borrowed) w/ 20% downpayment ($72,000): $1374.96

Putting it all together: A single pharmacist making $120k/yr buying the median home price in Los Angeles County using a conventional FHA loan at 4% and putting 20% down =

PI: $1374.96/mo
T: $324/mo
I: $75/mo
PITI = $1774 (rounded)

Therefore: $1774 / $8710 = 20.3% of income, which exceeds the FHA limit of 31%, so this hypothetical pharmacist can indeed buy the median priced home in Los Angeles County.


Addendum -- The above pharmacist can pay up to $2700/mo in PITI and still qualify for an FHA loan @ 31% DTI, so assuming they make the 20% down payment, the maximum house they can afford is: $556,225.

Addendum 2 -- Say the above pharmacist can only give 3% down (first time homebuyer's program), assuming the same parameters, the maximum house they can afford is: $474,600*
(*didn't account for PMI here, i can't do all the work, so reduce accordingly)

Assumptions = good credit history/score, no revolving credit card debt or other installment loans other than student loans, 2 years at employer + rental history, documentable income (W-2/pay stub or 1040 for 1099'd).

And in case you're wondering, here's a little beauty you can buy for $550,000 within LA county:

 

[confettiflyer]

How are you going to save for the 20% down payment for a $400-500K house when you have 200K in student loans? This is the average price for a house in SD, LA. I am not even talking about living in a nice part of LA or SD where it would cost at least 600K for a house. Don't even get me started about SF.

I wouldn't live in SF on a pharmacist's salary...even without debt, it's not a good idea.

And the answer to this question, my friend, is your answer:

I have said this before - if you are heavy in debt, live at home for at least 1-2 years (if possible). This will not only save you a lot of money but it will also save you a lot of time and stress.

This thread is not about buying a house with a huge student loan debt so I will leave it as that.

Well it turned in to one when you decided to become finance guru and say those with $200k in student loans can't afford to buy a nice home. I thought I'd prove you wrong with math and real life examples.

 

[awval999]

Well it turned in to one when you decided to become finance guru and say those with $200k in student loans can't afford to buy a nice home. I thought I'd prove you wrong with math and real life examples.

Confetti you know I love your calculations.

Still though... in your example that fictious pharmacist is not "affording" that home or that student loan. They are in monthly payment hell for the rest of their life.

Yes, a pharmacist can put themselves in monthly payment hell with a leased 2013 BMW 335i, a 30 yr 3.5% down FHA'd McMansion and an IBR'd student loan, but it's not really "affording" anything.

 

[Sure2Pass]

Because I like numbers and all of you a lot a lot, I made some "Back of the envelope calculations." Hope you can follow along.

This is great, talk about doing due diligence..

 

[confettiflyer]

Confetti you know I love your calculations.

Still though... in your example that fictious pharmacist is not "affording" that home or that student loan. They are in monthly payment hell for the rest of their life.

Yes, a pharmacist can put themselves in monthly payment hell with a leased 2013 BMW 335i, a 30 yr 3.5% down FHA'd McMansion and an IBR'd student loan, but it's not really "affording" anything.

haha...well hello! long time no see.

"Afford" is subjective. The definition I'm using above is the FHA definition for the purposes of home buying.

Even so... Assuming a net pay of $6000 (after withholding + 6% 401k), and putting the max allowable $2700/mo toward PITI on that stretch of a house you got, that leaves you with $3300 a month to do other life stuff.

I'm looking at my expenses....that's way more than enough.

Unless I get married to SHC1984, then my bank account is DOOMED.

 

[confettiflyer]

I reviewed my numbers - I'm a little bit off, but in the wrong direction in that my numbers are MORE conservative than I thought. Front-end DTI takes into account your total GROSS income, whereas I did NET income AFTER considering the IBR payment.

So theoretically, you can afford more house than I calculated up top. Take that extra cash and hit up Vegas or something

 

[BMBiology]

Addendum -- The above pharmacist can pay up to $2700/mo in PITI and still qualify for an FHA loan @ 31% DTI, so assuming they make the 20% down payment, the maximum house they can afford is: $556,225.

Addendum 2 -- Say the above pharmacist can only give 3% down (first time homebuyer's program), assuming the same parameters, the maximum house they can afford is: $474,600*

Don't even bring up the federal housing administration (FHA). They may need a government bailout soon:

http://www.nytimes.com/2012/12/13/business/study-shows-a-pattern-of-risky-loans-by-fha.html

Since the FHA is losing money, they are going to tighten their standards:

http://online.wsj.com/article/SB10001424127887324407504578187780598179510.html?mod=googlenews_wsj

They are going to require more down payment and increase insurance premium.

I can't believe people bought a house with just 3.5% down payment. With just a small down payment, they are going to pay a lot more interest and with insurance premium, their monthly payment is going to be much higher. No wonder these people can't pay their mortgage and the FHA is losing money.

BTW, the "house" you posted is not really a house. It's a condo/townhouse which means you will have to pay HOA fee (average $200-500 per month depending on the location).

 

[Sure2Pass]

Still though... in your example that fictious pharmacist is not "affording" that home or that student loan. They are in monthly payment hell for the rest of their life.

Welcome to America my man. Not saying it's okay, but, definitely that's about what happens in this country now a days... Interested to see how it turns out in 20 years when the entire countries student loans averages around 75k per person.

 

[SHC1984]

.

Unless I get married to SHC1984, then my bank account is DOOMED.

What??????????

I BEEN GOOD!!!!!! Instead of using all my Christmas money on new clothes and stuff I used it all to pay off my credit card debt!!!!

I didn't get anything for Christmas except for a box of Godiva chocolates and a pair of uggs.

At least I am credit card debt free..(FOR NOW anyways! )

 

[SHC1984]

The defination of AFFORDING is paying off the house, car, etc.

You can't afford it unless it's pay off.

 

[cycloketocaine]

This thread is like herpes.

No matter how bad you want it to go away it just keeps coming back.