Pay off student loans vs. save for home

[dianejsmith]

I currently owe $16,000 in 2 different loans at low interest (3.12%).
I pay a total of ~$150 per month. I'm planning on purchasing a house in the future and am contemplating paying off the loans first or saving for the down payment. I qualify for an FHA loan so I don't need a ton saved but still a considerable amount. I should have enough saved to pay off my loans in a few months or I could have $16,000 saved towards a home downpayment.

It probably makes more sense to save the money for a downpayment since the interest on the SL are so low. However, just knowing that those loans are out there is annoying. This debt is the only fixed debt I have (no cc's, no car payments etc...). Is peace of mind enough to pay off a loan before saving for a home or what do you all think?

[tobee43]

i can only tell you what my daughter did....it was this...

she called up the people with the student loan and said...can't do it...husband lost job...etc., well...they changed their payment from 650 a month to $96 a month........while it's true it's building up interest, she no longer had to worry about her house...which she is selling with an option to buy since they could no longer afford to live there either.

she and i just discussed this yesterday, student loans are never let go unless you leave this country....hold on to your house...because once that's gone it's going to be hard to get refinancing on another house...my opinion...however, if, and only IF you want to keep your house.

this is a big decision...really only one you can make...but i would start with telling the student loan people to work with you....now...or what....your going to default and they are going to what??? put a lien on your house?? it's an endless cycle of crazy i know and understand...it's a tough one.

i'm sure you'll make the right choice...good luck!!!

[Lockeout]

I, personally, would pay off the student loan first. I'll have mine hanging around my neck forever, and if there was any way to get rid of them sooner I would. And you never know what might happen in the future, but having two loans out (SL and FHA) makes it easier to fall into trouble. And since you said it would only take a few months to pay off the SLs, that doesn't seem like much of a sacrifice for the piece of mind it would give.
Furthermore, paying off your SLs might improve your credit rating and get you a lower interest rate when it is time to buy the home. And 3% is low interest, but only paying ~$150/mo on $16k will still take you about 9 years to pay off. And 9 years at 3% per year is still a good chunk of change that you can apparently avoid by just holding off buying a house for a few months.
/my two cents

[tobee43]

yes, i had to re-read and saw "thinking" about buying a house....

but you have to look at the long run of it all....housing prices are just about the lowest ever....it is a wonderful time to take advantage if possible, however, if the student loan is not current, most likely it will be difficult to get a mortgage anyway.

[nc73]

pay what you're paying now and save for a house. Interest on both are usually tax deductible.