Terry,, I met you recently during your Allstate Book Tour stop in King of Prussia, PA.
I am 26 years, I turn 27 in April. I just moved back in with my Mom after graduating from Graduate school in July with my Masters.
I have zero debt with the exception of student loans and my car. I have a combination of Federal Loans (Stafford Subsidized and Unsubsidized – I can provide a breakdown with interest rates and all if this is helpful) and Private Loans. My Federal Loans total $89,786. My private loans total $46,174.42 with a 9.25 interest rate. That’s a whopping: $135,963.42 its super crazy when I think about it and I’m not even a lawyer or doctor.
I also am financing my car. I have a 2010 Toyota Corolla with a 0% interest rate and owe $9,000.
My breakdown of my monthly expenses are the following:
Church: $295
Car: $334
Sallie Mae: $498 (Private Student Loans)
Fed Loans: $397
Gym: $35
Gas: $160
My bi-weekly net pay is $1476.31
I have $6,000 in my savings account.
I max out my employer match contribution to my 403b and the account currently has $4805.69
I have a Scottrade trading account that I opened when I thought I wanted to start doing some trading. I need to close it because I don’t have the time or the interest. Right now I have $1382.53 in that account. What should I do with it?
I also have a Rollover IRA that has $1841.79 in it from a previous employer.
I am writing because I want to move out of my mother’s house and buy my own home. I have been pre-approved for FHA 125K at 4.1%. My estimated payment with PMI and taxes is ~980.00/month if I buy a house for 125K. My loan would require me to put roughly 3.5-4% down.
I’m looking for a home now and want to move in soon. Do you think it’s okay for me to move on my own and purchase my own home?
Signed, “I would rather not rent! But I have to get out of my mother’s house!”
Terry Says:
I will give you my own personal opinion, and then direct you to a place where you can get some help that might give you some insight.
First, and very roughly, the way I figure it, you have take home pay of $3,000 a month.
Your current expenses, living at home, are about $1700. On top of that a mortgage would add about $1,000 per month — leaving you with $300 for food, electricity, cellphone, medical (??) insurance!
You don’t have to have a masters degree to figure out that doesn’t work!! And that’s without buying furniture, kitchen stuff, etc, all of which, with the required down payment, would eat up all your savings!
BUT suppose you had a roommate paying about $950 rent (which is probably cheaper than anyone else could move out), then you would have your mortgage covered. The real question is whether you could find a roommate (not a girlfriend!) who you could stand to live with better than your mother! (Remember, I’m betting that your mom does the laundry, grocery shopping, a big of cooking, etc.) Can you put a price on that?
Those are your best options.
Next, contact your private lenders and ask about a refinancing of those private student loans. And you might go to IBRinfo.org, and ask about the income based repayment plan on Federal student loans. That could lower your monthly payments a bit, though you might not qualify because of your savings.
I commend you for contributing the max to get the match in your 40l(k) plan. And you’re right to stop trading! But you always want to have a savings cushion, because home ownership always comes with some unexpected costs. (Did you include property insurance??)
Now, if you don’t like my analysis call 800-388-2227, and you will be connected to the nearest local office of Consumer Credit Counseling Services. You can trust them, it doesn’t go on your credit report, and you can meet with them in person.
You’re on the right path — just don’t close your eyes to the pebbles, and then they won’t become boulders! Terry
