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Don't pay too much mind to the clueless Calvinists. Debt is like a chainsaw. Used properly, it's a wonderful tool. Used improperly, it can really mess you up. It sounds to me like you are well-positioned at this point and headed in sensible directions. Tip of the hat so far, and just keep your wits about you going forward.
Leveraging debt to buy unnecessarily expensive cars is anything but sensible.
You mentioned in your original post that both of you have excellent credit so it's really not a question of how long after you're debt-free to apply for a loan but how much you've saved in addition to the $20k where you feel you have enough to maintain a home and withstand a potential job layoff/unemployment period that may last 6-8 months. When you say excellent credit, I'm assuming both of you have FICO scores over 740.
I know you don't want to tap into it but you do have the $48k gift which you'll slot into an emergency fund and by the time you pay off your cc debt in 2 years, you'll be that much far along on your car loans (not sure how much you have left on this but I'm assuming not much since you said you bought the cars coming out of college).
Having said all that, if you're diligent in paying off the debt, saving (including all bonuses/tax refunds if any) and renting cheap, I don't see why you can't buy a place in few years or immediately after you're debt free. Good luck.
Leveraging debt to buy unnecessarily expensive cars is anything but sensible.
Did Your Honor have to campaign for the position of Judge of Unnecessarily Expensive Cars, or were you appointed to it? Do you also issue advisory opinions on matters such as eating at unnecessarily expensive restaurants? Alternatively, suppose I were to come over and advise that you to cut down every tree on your property and have it sawn up and sold for firewood?
The OP is in any case quite well positioned in overall terms and seems to think in retrospect that the cars were indeed a bit excessive, but at that, it's the financing of these vehicles that is the issue here, not the cars themselves. Seeing if that debt could be moved to a less expensive platform would be appropriate. Selling the cars while underwater on the notes would not be.
Kris,
If you were my daughter, I would tell you to start applying now.
I would see what you can get for a mortgage right now, and see what
you can buy with that.
You don't have to have your forever home right now, do you?
But, paying rent for the next 2 or 3 years, vs. paying that money on a mortgage
so you will own it, I say get a mortgage if you can.
You have nothing to loose to apply.
Rent is more expensive today than buying anyway, just look for something
for now.
Good luck to you.
Did Your Honor have to campaign for the position of Judge of Unnecessarily Expensive Cars, or were you appointed to it? Do you also issue advisory opinions on matters such as eating at unnecessarily expensive restaurants? Alternatively, suppose I were to come over and advise that you to cut down every tree on your property and have it sawn up and sold for firewood?
Shaner's use of "unnecessarily" expensive cars was probably unecessary, but I don't think it warranted this reaction, or the divergence into unrelated questions. Debt can be used as a tool, but the cars themselves aren't a tool that gets the OP to the goal of owning a home closer to work.
Quote:
Originally Posted by oaktonite
The OP is in any case quite well positioned in overall terms and seems to think in retrospect that the cars were indeed a bit excessive, but at that, it's the financing of these vehicles that is the issue here, not the cars themselves. Seeing if that debt could be moved to a less expensive platform would be appropriate. Selling the cars while underwater on the notes would not be.
My concern would be that the savings that the OP accrued are the result of a gift, without that gift they would be on much shakier financial ground. Paying off some of the existing debt first would go farther in a money management sense in proving the couple ready to take on the responsibility of a mortgage and all of the other associated costs and set them up on a more stable path going forward. When the next medical emergency comes along it won't require a loan because the OP has committed to a home on top of the current debt, but the OP will be set up to pay for it directly.
Quote:
Originally Posted by Butterfly4u
Kris,
If you were my daughter, I would tell you to start applying now.
I would see what you can get for a mortgage right now, and see what
you can buy with that.
You don't have to have your forever home right now, do you?
But, paying rent for the next 2 or 3 years, vs. paying that money on a mortgage
so you will own it, I say get a mortgage if you can.
You have nothing to loose to apply.
Rent is more expensive today than buying anyway, just look for something
for now.
Good luck to you.
I certainly wouldn't base the mortgage decision on what I could get approved for. Also, I wouldn't get a mortgage unless you will staying there for a while, 2-3 years isn't long enough typically to break even on the transaction taxes alone, not even considering the temporary fluctuations of such a short term purchase.
Rent being more expensive than owning isn't always true and is highly dependent on the area. In general rent should be more expensive, but in many areas with limited inventory housing prices have increased faster than rents could be raised, or more than the general rental market could bear. I don't know the specifics of the area the OP mentions.
Shaner's use of "unnecessarily" expensive cars was probably unecessary, but I don't think it warranted this reaction, or the divergence into unrelated questions.
I tire sometimes of the holier-than thou moralizing. That's not helpful or useful. And the questions were actually all different shades of the same one.
Quote:
Originally Posted by msdmoney
Debt can be used as a tool, but the cars themselves aren't a tool that gets the OP to the goal of owning a home closer to work.
Yes, debt is not a tool of Satan. An intelligent actor will learn how to use and manage it effectively. The cars meanwhile are water over the dam. The quesion isn't what to do back then, but what to do now. Selling them while underwater is a pointless tack, as it merely locks in losses. Seeking to reorganize the debt in some way so as to minimize the residual cash outflow would be sensible. In the meantime, these cars are I suspect getting their owners closer to work, home, the grocery store, the dry cleaners, and etc. They are thus indeed earning some part of their keep. and they no doubt still provide some of the pop-and -pizazz returns that prompted their purchase to begin with. There are worse situations to be in. A house is still within reach.
Quote:
Originally Posted by msdmoney
My concern would be that the savings that the OP accrued are the result of a gift, without that gift they would be on much shakier financial ground.
Concern? Do you see a risk of the gift's being reclaimed somehow by the original donor? This is a $48K hard asset, neither more nor less because of the means by which it got there.
Quote:
Originally Posted by msdmoney
Paying off some of the existing debt first would go farther in a money management sense in proving the couple ready to take on the responsibility of a mortgage and all of the other associated costs and set them up on a more stable path going forward.
Having and responsibly managing debt is the objective. Using and then paying off debt as scheduled earns bonus points. Depending on how you do it, simply paying off debt can result in penalty points.
Quote:
Originally Posted by msdmoney
When the next medical emergency comes along it won't require a loan because the OP has committed to a home on top of the current debt, but the OP will be set up to pay for it directly.
Perhaps he should acquire health insurance cover if he does not currently have it. That's come in very handy for me over the years. Buying a home is not climbing Mt. Everest. Millions of people are known to have successfully purchased a home in Connecticut. There is little reason to believe that the OP cannot pull this off as well. They are in good shape already, have good prospects ahead of them, and have good heads on their shoulders. That's a lot to have on your side.
Thank you all so much for taking the time to respond to my posts. This morning I clicked on the CT forum only to read that the area I'm moving to has just been ranked the highest cost of living metro in the country. That's not exciting news. LOL.
Anyway, we sat down last night and put everything into a spreadsheet. We also consulted with our parents who are all fiscally responsible, and they all suggest taking the wedding gift and pay off as much interest debt that we can. After that, my dad suggested applying for a loan to see what we get approved for, and aim to spend no more than 75% of that on a house.
One more question if I may. After paying the 9,600 on my loan, and the 19,500 left on his student loans, should we take the remaining balance of about 20k and put it down on our vehicles? Or should we keep an emergency fund? I owe 24k on my vehicle and he owes 27k.
Don't pay too much mind to the clueless Calvinists. Debt is like a chainsaw. Used properly, it's a wonderful tool. Used improperly, it can really mess you up.
LOL. Debt is more like a Lion than a chainsaw. Sure it may look all majestic and cuddily, but without a moments notice, it can lock your head in it's jaws and snap your neck. It is really difficult to lose everything you own when you don't owe any money on any of it. However, when you owe on everything, well, History is full of examples of how that can work out.
Location: Prescott Valley,az summer/east valley Az winter
2,061 posts, read 4,134,533 times
Reputation: 8190
Quote:
Originally Posted by KrisTim1986
Thank you all so much for taking the time to respond to my posts. This morning I clicked on the CT forum only to read that the area I'm moving to has just been ranked the highest cost of living metro in the country. That's not exciting news. LOL.
Anyway, we sat down last night and put everything into a spreadsheet. We also consulted with our parents who are all fiscally responsible, and they all suggest taking the wedding gift and pay off as much interest debt that we can. After that, my dad suggested applying for a loan to see what we get approved for, and aim to spend no more than 75% of that on a house.
One more question if I may. After paying the 9,600 on my loan, and the 19,500 left on his student loans, should we take the remaining balance of about 20k and put it down on our vehicles? Or should we keep an emergency fund? I owe 24k on my vehicle and he owes 27k.
Thanks!!
Kristin
you have admitted the cars were a mistake~ since the loans on them are at 0% I wouldn't worry about paying them off~ better to have an emergency fund. From what I've seen you have a good handle on things and good advice from your parents. I agree with what you say your dad said, and good luck.
you have years ahead, don't forget to save for retirement
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