So...we are trying to buy our first house in January. My tuition is only 3-4 grand a term for my masters and it will probably be paid by my adviser (he gives tuition stipends for research) With the new stafford limits as a grad student I can take out up to 32k a year at 6.8%. Would it be a good idea to take this out and pay off our credit cards and refinance our car to give us a better shot of a good rate on our mortgage? The 6.8 is much lower than the 13% on our car and the 10-17% on our cards. We could also put down a bit bigger of a down payment while having a large chuck in the savings in case anything happens. Is this a good idea? I only have 8g in loans from undergrad summers, so it would put my total for my masters and undergrad loans at about 40g if I took the max. That doesn't sound too bad ot me, especially figuring that we don't have to start paying it until after I graduate. Any comments and advice would be awesome. Thanks.
Stafford Loan + House
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You cannot take out more than the cost of attendance for your academic program. The Stafford limit of 32k is irrelevant.
That doesn't answer my question at all. I believe my cost of attendance is 25k. So that would make what I can get in loans probably like 19-20k. regardless, would it make sense to take out the loan for the purpose above? that is my question.
Well the math makes sense having lower interest, but it is risky only because if you end up paying off your credit card and then using it for whatever reason, well then your paying double interest?
but if you are confident that you can cut the cards up then i dont see a problem with it its basically like you are barrowing money to pay off barrowed money with a better interest rate.
But if you are trying to increase your credit i wouldnt reccomend paying your car off unless you dont owe much because making the payments on your car each month is what increases your credit not just paying it off in one sum, just a thought!
Also im not sure which loans you are applying for but i ws approved for a grad plus loan which has around the same interest and you can take out the max they just send the money to the school first and whatever is left over is sent to you, they do not keep tabbs on what you use that money for!
but if you are confident that you can cut the cards up then i dont see a problem with it its basically like you are barrowing money to pay off barrowed money with a better interest rate.
But if you are trying to increase your credit i wouldnt reccomend paying your car off unless you dont owe much because making the payments on your car each month is what increases your credit not just paying it off in one sum, just a thought!
Also im not sure which loans you are applying for but i ws approved for a grad plus loan which has around the same interest and you can take out the max they just send the money to the school first and whatever is left over is sent to you, they do not keep tabbs on what you use that money for!
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The cost of attendance is the cost of tuition + fees + living expenses + books + health insurance. The budgets are usually tight enough that once you buy everything you have to, and the school takes out it's cut, you are not left with much. No more than 3-5k of leftover money in a given year. That doesn't give you many options at all.
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How do you expect to buy a house without income? Unless of course your SO has a decent income this will be impossible. If the 25k figure for your CoA is true then you have some leeway but it will be hard to buy a home with just that.
Of course we have income. I posted on this forum for advice, not to be called a *****. Obviously we must have some kind of income or it wouldn't be an option. My fiance works two fulltime jobs. I also have two jobs (but I only work about 35 hours a week) Why do people assume that just because you are in school you don't work? I should not be paying for tuition or books. Health insurance is not required at my school. My idea was to use the leftover from whatever my fees and such are.
We have savings, we are working on paying off all of our credit cards. We were hoping to get the max loan to help make the down payment larger and maybe make our car payments a little smaller.
Ignore this thread. Forget I asked anything.
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You don't need to get defensive, but if you want proper advice then you need to give us full disclosure on what your finances are like and the situation you are in. Of course you should take out the maximum loan amount and penny pinch. Pay off your high interest credit cards first. Buying a house will be difficult though. I also recommend you get health insurance. Get something with a high deductible if you want to save money but you should have it in case of emergencies.
I havent had health insurance in years, another one is not going to make a difference. They won't cover anything anyways. Not my crohn's, my asthma, anything. So what's the point? I wish I could have insurance, but its not gonna happen.
Yes, getting a house is hard which is why I was looking for the little bit of help if possible. I just wish my school's coa wasnt so absurd. Seriously, how can one pay rent and eat off of 7g a year? lol it's comical!
Yes, getting a house is hard which is why I was looking for the little bit of help if possible. I just wish my school's coa wasnt so absurd. Seriously, how can one pay rent and eat off of 7g a year? lol it's comical!
Your situation seems.... complicated. Borrowing at a lower rate (staffords) to pay off higher-interest debts is a good idea, but you should probably think long and hard about buying a house until things settle down for you financially.
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What's your actual CoA? Before you said it was 25k. Depending on how long your semester is, a CoA of tuition (4k) + cost of living (21k if you are correct about the 25k) is more than generous. For a 12 month year my cost of living on top of tuition and fees is 56k with 30k of that being tuition and fees. The rest is books and supplies, living expenses, personal and other, and transportation. I'll probably only take out about 40k out of that 56k in aid since they gave me 26k to live on if I wanted that full amount.
As for your health insurance, why wouldn't they cover your asthma? I assume it would be under control with inhaled corticosteroids and beta2ags if needed. For your Chrons I would understand them not covering a TNF alpha inhibitor but honestly if they don't cover any of this or emergencies you had the wrong insurance. Those steroids and inhalers should be cheap.
It's a bit more complicated than that. The school insurance is what I have access to and its not very good. I use Symbicort for my asthma. Their plan would require me to pay 65 a month for it AFTER i reach the 300 prescription deductible. Right now, I get it for free through Astra Zenacas patient assistance program. This insurance DOES NOT cover preexisting conditions, which include my Crohn's and asthma. Overall it makes no sense to bother with it, especially since at my school you can see the doctors in the health center for free.
I just double checked, my COA is 23k for the year (3 semesters). Tuition is about 4k a term and with books and suppies more like 5k. So that's 15k just tuition, leaving 8k left. It's not at all a logical figure.
To Tapir: We are pretty stable. Rents here are much higher than owner a house would be. Florida's housing market collapsed. A brand new 3 bedroom house we were looking at is listed at 90k and has been on the market for months so we could probably offer even lower. Since we are going to be here for my masters and then I need to work for at least a year or two before PhD, it makes most sense to try to buy. Our rent is $925 a month, the bank quoted a mortgage of 80k (putting down 10-15) at around $540 (before insurance and such) which means that a full mortgage payment (insurance, closing costs, etc) included would be very close to what we are paying ot rent. Does that make sesne?
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$925/month? Wow, that's a real deal. I'm sorry I was less helpful earlier. The thing is, until recently, it was a very bad idea to buy a house while taking out student loans because houses are a money vacuum.
A new house means minimal maintenance (and hidden costs), and 90k must be less than the place cost to build. Sounds like a once in a lifetime deal, and you should take it if you can make the financing happen.
Yes, paying off credit cards and car notes makes sense, if you can within the limits of funding given by student loans.
A new house means minimal maintenance (and hidden costs), and 90k must be less than the place cost to build. Sounds like a once in a lifetime deal, and you should take it if you can make the financing happen.
Yes, paying off credit cards and car notes makes sense, if you can within the limits of funding given by student loans.
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Hi, if you read my other postings about this topic, you'll see that I am generally a proponent of home ownership, UNDER THE RIGHT CIRCUMSTANCES. You need to make a very educated decision about buying a house. 90k sounds like it is in the ballpark of what you can afford with rents as you quote them, but there are a few things to watch out for:
1. It doesn't seem like you are including property taxes in you monthly payment (you don't pay them monthly, but they must be included in your monthly payment in order to make a fair comparison)
2. Are you sure you can get a mortgage? You quoted your car loan at 13%. That's outrageous, and the only reason that I would guess that you got stuck with such a $hitty car loan is because you have pretty bad credit. Home lenders won't touch you with a 10 foot pole nowadays, if that is the case.
3. The previous poster's comment about "They couldn't have built that house for 90k" demonstrates my third point. Yes they can.....if it is of below average construction quality (regardless of the fact that the housing market in FL took a huge dump.) Home builders are by no means created equal, and I've seen lots of people buy new, thinking, "Great, if I buy new, I will have no maintenence issues," and be sadly mistaken. The builder will throw in a warranty, but that involves the builder sending his people to take care of the problems (and you WILL have problems, unless you are dealing with a top-notch builder, but those builders don't build 90k houses, even in this market) which will waste your time (for me, my time is WAY more valuable than my money, and I can't wait around all day for the builder's A/C guy to show up, like my mother did a few weeks ago, and she bought a house from a middle-of-the-road to better quality builder.)
But, to answer your original question, borrowing "from Peter to pay Paul" won't influence your creditworthiness at all. It does make sense to take out the extra Stafford loans to pay off high-rate debt, but doing so won't improve your creditworthiness.
How is 13% outrageous? (I was actually wrong its 11% but still) He has very good credit (about 700 last we checked). The car is in his name alone and the house will be too. Because of my student status I am not allowed to be on the loans...they consider me more of a liability than a help. Our car before this was 18%. I think you may need to consider our ages here. He is 26, I am 23. You aren't going to get a 5% interest rate if you only have a few years of credit history, regardless of how good it is.
I'm not concerned with credit worthiness. He has very good credit, the issue we have is wanting a larger down payment and some extra in the bank in case of an emergency. We also have a good cosigner to help us. We tried last year and were denied because the mortgage needs to be 40% or less of your income and it wound up being 55& and we needed a larger down payment. We've been saving and trying to get things in order. The biggest reason for having the credit cards totally paid off is not just to look good, but to have access to that money if anything happens. Buying a house using predominantly one salary is scary because is anything happens and he can't work we are screwed so I want to have like 3-4 months worth of bills available to us if we need. Does tht make sense?
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I beg to differ. Right out of undergrad (I was 21,) I had a 7% car loan, which was market rate at that time (i.e. lowest rate my credit union offered to anyone -- market rate now is ~4.5%, and you can often do better from dealerships.) But, I'll take your word about your credit.
In your original post, you said:
"Would it be a good idea to take this out and pay off our credit cards and refinance our car to give us a better shot of a good rate on our mortgage?"
...so that's what I was responding to. Your total loan balance won't change if you borrow extra Stafford loans to pay off consumer/auto loans. Therefore, I don't see how doing this would improve your chances of getting a mortgage, UNLESS, you were going to keep all separate accounts (always a good idea, in my opinion,) where one of you takes all the debt and the other gets the mortgage. If that were the case, there's nothing stopping you from doing that now (i.e. the Stafford loan is irrelevant unless that's how you will be transfering the debt from one person to the other. If this is the case, then I think that that is a good idea (my wife and I did that many times when we were first starting out.)
That makes sense (in addition, you will be swapping high interest debt for low interest debt, which is always a good deal.) Best of luck to you!
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5 years of spotless credit history would be enough to get you an auto loan for < 11%. As far as your mortgage is concerned, I would wait until you have eliminated your high interest debt before you try to get into a house (I know it sounds crazy, but if people had thought of doing this 5 years ago we wouldn't be spending billions to bail out everyone who is going into foreclosure right now).
My advice:
-take out as much stafford as you can to help pay off your credit cards and auto loan
-penny pinch and put some away for a down payment/emergencies
-purchase a home when you can actually afford it
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Just a note, even with excellent credit (mine is 790, hubby is 760, and we make 6 figures) buying a home is not 'simple' right now. We had to trot out finances from 3 years back, provide evidence that his work is stable, agree to PMI even though we are putting 20% down, and show an almost complete lack of other debt (our only other debt is my car, a Prius, bought in 2006, at <5% interest.) We are not going for a huge half million house, and actually the house we are purchasing = 1 year of hubby's income (not including mine) so the markets right now are great for buyer, but the mortgage might not be so easy to obtain. Also, we are having to deal with more rigorous inspections and appraisals, which also include community info, because banks are frustrated with people being upside down.