Has anyone had experience with buying a home on a fixed income and with student loan debt?

3DOCTORS · #1 Jun 17, '12, 4:56 pm

The question pretty much says it all. I lived in my parents' home from the time Dad died till 3+ years after Mom died. But I couldn't keep up the payments or do the legal stuff to get it through probate, and it got foreclosed.

Since last fall, I've been living in an apartment about 1/5 or less the size of our house (which was just an average middle class home, 3-br/with basement, not a McMansion or anything). I have downsized and all but really need more space. In fact, I could be in danger of eviction for having too much stuff crammed in.

I'm working like mad to get rid of what I can donate or toss but there comes a point at which I can't see this place working. I can't get rid of the equipment and supplies I need to work on my artwork and writing and sewing (which might be saleable and boost my income - if I had ROOM to do something with them!

In other words, it's just gridlock. I would rather get out before the owner of the property evicts me and I have a bad mark on my record.

It's possible I could bump up to a 2-bedroom apartment where I am; I've discussed this with the manager, but there is an issue that may make that unfeasible, so I'm starting to look at apartment listings.

While I was at it, I looked up real estate listings. Found some houses I might be able to afford. Don't know what condition they're in, but I can go look at them. I would much prefer a house because I like the autonomy and not feeling like I'm having to answer to someone on how I live, whether I have pets, etc. as long as I'm making my payments and not doing anything immoral or illegal.

Now the kicker - I have student loan debt. And it's been in forbearance or deferment for many years; I imagine if I want to buy a home I need to finally work out a payment plan with the student loan and work that into the monthly budget. I would just hope it wouldn't be outrageous how much they'd want.

I ask anyone who has been on a super-tight budget if they - or anyone they know - has been able to still buy a house. One good thing, I don't have car payments. May have some repairs at some point for my vehicle, but if I could get settled in a house that was mine, I wouldn't need the big van I have now for hauling and could sell it and use the proceeds to buy a less gas-guzzling vehicle.

Feedback? Ideas? Please be kind, I feel guilty for wanting more, yet I'm not asking for the moon and the stars either. I've been praying a lot, including through the intercession of St. Joseph, to find a real home, where I can settle and be at peace and productive, after a long and stressful decade of loss and uncertainty and running around like a chicken with my head cut off.

Thanks.

StarFireKK · #2 Jun 17, '12, 7:32 pm

I'd go make some appointments and talk to some banks/credit unions about what you would need to qualify for a loan. They can give you some idea about what type of loan you might qualify for and what documentation you will need. Be realistic about your income and credit situation (they will find out anyways.)

Generally, on student loans they consider 2% of the outstanding balance as a monthly payment even if the loan does not require you to pay it at the moment.

Good luck.

lerapt78 · #3 Jun 17, '12, 7:41 pm

Hi 3Doctors,

First of all, I don't think you need to feel guilty about anything. There is nothing wrong in wanting to have a modest home for yourself, plus it is a good investment, so it is a wise desire as well.

I wouldn't advise you to give out too much personal information on the web, but it's a little hard to give a straight answer without knowing financial details (any money saved for a downpayment, any other assets such as stocks/IRAs, what is your income versus the cost of homes you're looking to buy, etc, how much equity was in your parents' house, etc). In general, I would suggest that you not look at any homes that are more than twice your income

Generally speaking, banks do not like to own a lot of homes in foreclosure status because they can wind up losing a lot of money off them if they remain unsold on the market for a long period of time, or if it is a "buyer's market". Of course, this depends on other factors, such as where you live and how many other homes in your town are available for sale or in foreclosure, etc. I would suggest that you look at other homes (less expensive than that of your parents') that are in foreclosure, or an area of town that has an abundance of homes for sale. This is the first step - make sure that you are not overreaching and that you are only looking at homes within your budget. Mortgage companies are more wary now of financing homes that cost 5 tines as much as the applicant's income.

You said that you are renting an apartment now. Have you given thought to renting a house? This would give you the additional space you desire (remember, you could always use the garage as a studio instead of an extra bedroom), and you could also get a roomate to help with the rent. If you do this, you may give yourself additional time to save money and you could even offer to buy it from the owner without having to go through a real estate agent (which costs additional money for the owner in terms of commission).

Just a few starting pointers since we don't know how much of this you have researched on your own.

maltmom · #4 Jun 17, '12, 7:58 pm

Have you consolidated your student loans. I did and I went from $1000 per month for 10 years to $387 for 30. I was able to buy a house even though I had been in school for 7 years and had just started my career. Your interest rates on the student loans are probably less than the mortgage on the house. If you buy a modest house your mortgage could very well be equal to or less than your rent. You also have a tax deduction on the interest paid. The tax part I think I'm right about, but my CPA handles that.

Good luck!! Owning is better than renting. At least until things start to break. Having a home warranty plan helps with that.

lerapt78 · #5 Jun 17, '12, 8:31 pm

^^^^ Good advice.

Aggies08 · #6 Jun 17, '12, 8:49 pm

Can you keep up with house repairs? For a well-maintained house, the rule-of-thumb is to put aside 1% of your house value/year to use on repairs maintenance. Can you afford to save up the deductible of your house insurance, etc?

Have you thought about renting a home?

ricofall · #7 Jun 18, '12, 12:03 am

Quote:

Originally Posted by Aggies08

Can you keep up with house repairs? For a well-maintained house, the rule-of-thumb is to put aside 1% of your house value/year to use on repairs maintenance. Can you afford to save up the deductible of your house insurance, etc?

Have you thought about renting a home?

Aggies is right. We are on a single income household with 2 little children. I live in a neighborhood that has single, and two story houses. While buying a house is considered one of the best moves you can make, it is not the best for everyone. I can tell you as a teacher, we struggle monthly but we manage because we put some in savings and budget ahead. Owning a home also means paying property taxes, lawn care, and damages.

However to answer your question, you really need to see a credit union or mortgage loan officer. I would always recommend a credit union though. Do not be ashamed or afraid, the most likely seen worse.

**1ke** · #8 Jun 18, '12, 6:21 am

If you are on a fixed income you also need to determine how you will cope with rising insurance and property taxes in your mortgage escrow. Your mortgage payment may start out affordable, but then if the value of your home increases the taxes and/or insurance premiums rise and so will your mortgage payment. Some sources of fixed income adjust with inflation (theortically) but will it be enough to cover cost of living, increases in taxes, home maintenance, saving for emergencies, paying your student loans, and eventually you will probably need to replace your vehicle.

Do people on fixed incomes buy homes? Yes.

Is your circumstance one in which you can afford to do so? Only you can know this for sure.

**Ridgerunner** · #9 Jun 18, '12, 3:59 pm

Quote:

Originally Posted by 3DOCTORS

The question pretty much says it all. I lived in my parents' home from the time Dad died till 3+ years after Mom died. But I couldn't keep up the payments or do the legal stuff to get it through probate, and it got foreclosed.

Since last fall, I've been living in an apartment about 1/5 or less the size of our house (which was just an average middle class home, 3-br/with basement, not a McMansion or anything). I have downsized and all but really need more space. In fact, I could be in danger of eviction for having too much stuff crammed in.

I'm working like mad to get rid of what I can donate or toss but there comes a point at which I can't see this place working. I can't get rid of the equipment and supplies I need to work on my artwork and writing and sewing (which might be saleable and boost my income - if I had ROOM to do something with them!

In other words, it's just gridlock. I would rather get out before the owner of the property evicts me and I have a bad mark on my record.

It's possible I could bump up to a 2-bedroom apartment where I am; I've discussed this with the manager, but there is an issue that may make that unfeasible, so I'm starting to look at apartment listings.

While I was at it, I looked up real estate listings. Found some houses I might be able to afford. Don't know what condition they're in, but I can go look at them. I would much prefer a house because I like the autonomy and not feeling like I'm having to answer to someone on how I live, whether I have pets, etc. as long as I'm making my payments and not doing anything immoral or illegal.

Now the kicker - I have student loan debt. And it's been in forbearance or deferment for many years; I imagine if I want to buy a home I need to finally work out a payment plan with the student loan and work that into the monthly budget. I would just hope it wouldn't be outrageous how much they'd want.

I ask anyone who has been on a super-tight budget if they - or anyone they know - has been able to still buy a house. One good thing, I don't have car payments. May have some repairs at some point for my vehicle, but if I could get settled in a house that was mine, I wouldn't need the big van I have now for hauling and could sell it and use the proceeds to buy a less gas-guzzling vehicle.

Feedback? Ideas? Please be kind, I feel guilty for wanting more, yet I'm not asking for the moon and the stars either. I've been praying a lot, including through the intercession of St. Joseph, to find a real home, where I can settle and be at peace and productive, after a long and stressful decade of loss and uncertainty and running around like a chicken with my head cut off.

Thanks.

Too many blank spaces to know whether you should or not.
Of concern is your statement that you couldn't "do the legal stuff" to put your parents' house through probate, so it was foreclosed. Frankly, that does not persuade me of clear-headed business judgment, since there are lots of probate lawyers and they work on a percentage only. But admittedly, there might be things I don't know about with that.

How certain are you that your art and such really has commercial value? There is an awful lot of it out there and a lot of very good artists don't even pay for their materials with it. Is this a truly rational basis for making a major economic decision?

yes, autonomy is a nice thing, but are you ready for that yet?

In my opinion, the very first thing you need to do is go talk to a lender and find out:
a. If you can qualify for a loan at all. Many people don't nowadays.
b. If so, what kind of house can you reasonably afford?

I also think a decision like this depends a lot on what kind of community you live in. In a small town, buying an old "fixer-upper" is in no way a hazardous thing to do. In a large city, it most definitely can be.

Having said all of that, when my wife and I were first married, we had some fairly smallish student loans. We lived in an apartment for a couple of years. I had no car payments because my car cost $300. I found a house that an elderly lady had not lived in for years because she was in a nursing home. Her guardian was desperate to get rid of the house, and it needed absolutely everything because it had been neglected. The guardian was a banker, so I told him we would buy it if he loaned me 100% of the money to buy it. He agreed. We fixed it up with what materials we could afford periodically and an enormous amount of sweat. Every night when I got home, it was work on the house. Even then, it was hard to make the payments and make the student loan payments as well. We bought our furniture at estate sales and I stripped and refinished it.

Then one day, a utility truck ran over our gas line and collapsed it. So we dug it out and had a professional replace it. Eventually, we had to redo our sewer line because of tree roots and ancient pipe. It was hard to heat because the window caulking had all dried out. So, we replaced that. On and on and on. But we ultimately did get it in shape, and it was then a nice place to live in, and worth more than we had in it.

But it was a long, tough haul. Unless a house is really in tip-top shape, it's a lot of work and will eat up your time like you won't believe.

3DOCTORS · #10 Jun 18, '12, 6:41 pm

I appreciate the thoughtful and detailed replies. Thanks everyone!

The reason I wasn't able to do anything legally about my parents' house was that at the time I was not employed and was waiting for my disability to come through so I could barely afford gasoline or much of anything. Definitely thankful to God for helping me get through those trying times.

Well, I think probably I'll rent for now anyway - something just bigger enough to provide me the space I need to do the projects, which may generate some revenue, I hope, yet not so much bigger that the rent is a struggle. Then I'll look into getting the student loans into some kind of repayment plan so that it'll help me be more loan-worthy later on when a bank would be figuring out my debt ratio.

Thanks for the figures on that, StarFireKK, and for the figure about maintenance, Aggies08; those are quite helpful. It's all helpful, so again, thanks everyone!

PaulGH · #11 Jun 20, '12, 12:16 am

Just based on the information you have provided here, it sounds like you are not in good enough financial shape to buy a house right now.

Here are some things to consider:

Do you have a 20% down payment for a house saved up? If not, then I assume you would have to pay PMI each month, which is an additional expense you would need to factor in.
As someone already mentioned, you have to plan for home repair expenses.
There will probably be many expenses when you first move in -- some of which you may not be considering. For example, does the house need new curtains or blinds? Does it need any new appliances? Do you need to paint any of the rooms because the previous owners picked hideous colors? Are there any maintenance issues that need immediate attention? Do you need new furniture for the house? Are there any improvements that technically aren't repairs, but that you see as necessary to make the house livable?
Have you considered that you may have to pay closing costs on the mortgage?
Have you factored in property taxes and homeowner's insurance? Both of these expenses may go up from year to year as well.
Have you factored in utility bills? These will likely be much higher for a house than for a small apartment.

Sorry to be so negative, but it is better to think of things like this now, than to be unpleasantly surprised later.

Iheartcoffee · #12 Jun 22, '12, 6:24 pm

If I were you I would RENT a home. Buying a home require homeowners insurance, a certain amount set aside for taxes, a mortgage, repairs, etc.etc.

While you are getting back on your feet financially you want to keep your costs as fixed as possible. By renting a home you will be able to work on paying down your debts without having to worry about the cost of replacing a broken pipe that floods the basement, or the cost of a new roof if a big storm hits. Renting a home gives you the space and the yard, but without the uncertain costs. You know how much to pay each month when you rent and if the price goes up at the end of your lease...you move. Easy as that.

Don't buy until you have paid off your debts, built up an emergency fund, and can put down 20%. It sounds like a lot, but you will be more financially secure because of it.

johnsheppard · #13 Sep 22, '12, 7:29 pm

If you are on a fixed income my gut reaction is to simply rent a larger place, or perhaps a storage unit for the extra "stuff" you can't unload. You can talk to the banks and whatnot but in all honesty, the best way to control housing costs is to rent, since residential leases generally do not have pass through provisions.

3DOCTORS · #14 Sep 24, '12, 4:31 pm

Quote:

Originally Posted by johnsheppard

If you are on a fixed income my gut reaction is to simply rent a larger place, or perhaps a storage unit for the extra "stuff" you can't unload. You can talk to the banks and whatnot but in all honesty, the best way to control housing costs is to rent, since residential leases generally do not have pass through provisions.

I do not want to rent forever and never have the right to decorate or have the pets I want to have and other things that you can't do when someone else owns the property (nothing illegal or immoral, just unconventional!

). I'm willing to sacrifice and try to find a way and I know it will take time. But if I rent and am never able to save I will feel despair. If I try my darndest to become a homeowner (I recently took a class and that helps me see I'm at Point A and what it'll take to get to Point B) and I get old and know I'm going to die at least I'll know I tried.

jwinch2 · #15 Sep 24, '12, 5:57 pm

I was in the same situation when I purchased my home in 2008. I had significant student loan debt and no money for a down payment. Thankfully, I qualified for a VA loan which allowed me to secure a loan without down payment, and my credit rating was pretty good. Crediting agencies typically look at debt differently. Student loan debt is often seen as "good debt" while a car note or credit card balances are seen as "bad debt".

I would sit down with a creditor and see about your situation. You may be surprised at what you can do or at the least, you could get a better understanding of your current situation and what steps you need to take to improve it.

Best of luck,

Peace,