Pay back student loans or save to buy a house?

[BMBiology]

I have a couple of loans that I am thinking about paying off - $8,000 at 6.8% interest; $3,000 at 5% interest. It doesn't seem like the real estate is going to recover any time soon. I have less than $100,000 in saving. Would you pay back in full for those 2 loans or keep on saving to buy a house (less than $600,000).

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[Sparda29]

I have a couple of loans that I am thinking about paying off - $8,000 at 6.8% interest; $3,000 at 5% interest. It doesn't seem like the real estate is going to recover any time soon. I have less than $100,000 in saving. Would you pay back in full for those 2 loans or keep on saving to buy a house (less than $600,000).

I'd pay back the loans and build credit for the house.

 

[Momus]

Just think what kind of investment that can generate absolute interest 6.8% nowadays? Not many. Just kill the loan and save yourself 6.8% every year.

 

[rph3664]

Pay back the loans.

ETA: As many of you know, I haven't worked as a pharmacist since March (although I do have another interview on Monday - woo hoo!) but a few months ago, I had a CD come due and that amount of money was sufficient to pay off my house, and so I did it.

 

[kimberlinka xo]

Pay the loans, lower your debt to income ratio, and it will qualify you for better financing options when you go to buy your house

 

[J ROD]

With those meager amounts, I would pay off the loans and then save at least 20% for the house.

And build quan known as credit to boot.....

 

[rxforlife2004]

I have a couple of loans that I am thinking about paying off - $8,000 at 6.8% interest; $3,000 at 5% interest. It doesn't seem like the real estate is going to recover any time soon. I have less than $100,000 in saving. Would you pay back in full for those 2 loans or keep on saving to buy a house (less than $600,000).

lol...can't believe you would even ask these questions with such situations...lol...what a smart Pharm.D.

 

[BMBiology]

what if the student loan is $25,000 at 4.5% interest rate? You would pay it back now? I am thinking the interest rate for a mortgage would probably be higher than 5% in a couple of years.

 

[J ROD]

what if the student loan is $25,000 at 4.5% interest rate? You would pay it back now? I am thinking the interest rate for a mortgage would probably be higher than 5% in a couple of years.

Well, you could do both at the same time. I would pay off the loans, build the credit from it, and get a more favorable debt to earnings ratio.

Interest rates will probably rise but not that much unless the economy turns around. I still say you need more downpayment on the house or buy less house.

First, have you tried to see if you can financing on that house? If you really want the house that bad, you could always go and head and take the interest now and then save money on the side and pay it strictly to the principle. That way you can pay on the amount owed and not merely the interest.

Those small amounts of loans are not that problematic. I really need to know more about how bad you want the house, more finances like how much you make per month, etc.

Smart choice is to wait a few yrs on the house and get those loans paid off and save for the house. But, you more than likely can get it done now if you can get someone to finance that amount of house for you with that much for a downpayment.

 

[confettiflyer]

Buy the house. As long as your front end DTI is <33% you'll get favorable terms, paying off your loan won't give you benefit and you'll get dinged for not having a higher down. (i'm assuming your lowest credit score >720/760)

If your DTI >33%, pay the entire loan balance off as paying additional principle won't do diddly squat since your payment is the same qmonth.

EDIT: $11k loan balances? that's like practically nothing. advice still remains the same, but my guess is your DTI is <33%. Any credit card balances we should be considering?