Looking for advice on saving for first home purchase

6 Replies

Hello all,

A little background, I have recently graduated college (1 year ago) and have been working as a mechanical engineer now for about 8.5 months. I am currently living in Texas. This is temporary and it is per-diem life (no rent or car payments) and the job will be finishing up in February to April. Our next job is going to be in Phoenix Arizona and will last between 3-5 years. This will also be per-diem life but If I get my own place there I will also get housing per diem not just food like I am now (living with boss currently). 


So my question is, I have about 100k in school loans, should I save every dollar I can to put towards down payment and renovations (just do minimum payments for loan) for when I get to Arizona and buy house...or should I look into what the market is, how much the house will be, and kind of budget a way of saving just enough to have x$ for renovations and nonpayment and try to cut down on my loans as much as possible. 


My thoughts on this are leaning towards save as much and continue with minimum payment, it is not going to be long enough to make a huge dent in my loans. But I am open to other viewpoints on this. 


Also if anyone is from the Arizona area please feel free connect with me. I would like to learn as much as possible about the area!!


Thank you!

@Adam Sherwood

I'd save what I could for getting a property and pay down the loans later if the rate of return on the investment side is higher than the interest from your loans.

Also, make sure you choose a good area here. Don't go for the cheapest spot as it'll cost more in renovations and you'll end up with a property not many people would be interested in when it comes time to sell because of the location.

What part of town would you be looking to move to?

Welcome aboard. I think a strong argument can be made for both approaches. I had a lot of debt coming out of school and chose to take years to aggressively pay it off. If I would have bought a house a few years in instead of paying the debt I'd be sitting on a goldmine of appreciation right now. That's the way it went for me, because I knew nothing about real estate at the time or just how fast Phoenix was growing.

So I understand, if you buy a house you get a per diem that pays for part of that expense? I assume this would be the same if you rented? Also, how much do you have saved currently? It could cost you close $100k in down payment just to get into a nice neighborhood in some areas out here now (Phoenix, East valley). I bought a rental in Chandler in June, 1600 sq ft, 4/2 for $420k.

The decision becomes much easier if you have a low interest rate on your students loans, but even if not, I think it makes more sense to get yourself into a house at the youngest age you possibly can. Real estate is a powerful tool for wealth over time. You can always make more money later to pay off your student loans, but you can't earn back lost years. 

@Adam Sherwood welcome to the forums and thanks for posting! If you can check out Phoenix, Mesa, Scottsdale markets, it would be wise to keep saving your down payment for your AZ purchase. If you can, refinance your private student loans to a low interest rate, and put your federal loans on a repayment plan. You should check out the student loan planner with Travis Hornsby. He ha some great strategies for attacking student debt and investing for the future. I would advise investing or buying a home sooner than later. My wife and I have been throwing extra at our student loans but have also house hacked and purchased 1-2 properties per year the last 3 years so it is definitely possible to do both.
You will want to talk to a lender and see how your DTI looks now for your home purchase with your student loans. Getting an idea of your qualification will definitely help even if you may be a few months away from purchasing. Please do not hesitate to ask more questions and there are multiple solutions as you seek to find the best one for you.

To all that have responded thank you so much. I refinanced my loans a few months back. Interest is about 3.1%. Federal loans are currently interest free thanks to covid relief but I believe that is coming to an end soon. the location that I will be looking into really will depend on where the next jobs integration facility is. I will speak to my boss this week and see if he has a good idea of a radius this could be in. Per diem in Phoenix is 159 a day. Coming to about 1k a week. Which can easily cover monthly expenses for housing. This is not taxed and from my understanding does not show as income. I am not sure how this would impact DTI. Im sure this is something that would be discussed with lender.

@Adam Sherwood househacking (aka renting by the room is a great strategy). With an influx of people and limited rental options, you'll have no shortage of qualified tenants who would love to rent a room. I have several clients from BiggerPockets that are renting their house by the room. You'll easily be able to live mortgage free, and possibly even cash flow a little. One thing to note is the lender will not be able to use the future possibility of room rental income to qualify you for the mortgage, so you'll have to be able to qualify on your own. 

Originally posted by @Adam Sherwood :

Hello all,

A little background, I have recently graduated college (1 year ago) and have been working as a mechanical engineer now for about 8.5 months. I am currently living in Texas. This is temporary and it is per-diem life (no rent or car payments) and the job will be finishing up in February to April. Our next job is going to be in Phoenix Arizona and will last between 3-5 years. This will also be per-diem life but If I get my own place there I will also get housing per diem not just food like I am now (living with boss currently). 


So my question is, I have about 100k in school loans, should I save every dollar I can to put towards down payment and renovations (just do minimum payments for loan) for when I get to Arizona and buy house...or should I look into what the market is, how much the house will be, and kind of budget a way of saving just enough to have x$ for renovations and nonpayment and try to cut down on my loans as much as possible. 


My thoughts on this are leaning towards save as much and continue with minimum payment, it is not going to be long enough to make a huge dent in my loans. But I am open to other viewpoints on this. 


Also if anyone is from the Arizona area please feel free connect with me. I would like to learn as much as possible about the area!!


Thank you!

 Hi Adam!

Sounds like you could use a bit more info, to help you make a decision. One of the overwhelming things that keeps people from taking action and investing in real estate, is not knowing what their options are, what their borrowing power and options are, what their financial costs and requirements will be to buy, and then to make payments, what their return for that investment will be (income, appreciation, liquidity). Lots of things that are unknown. Even worse, is people that start investing and never get this info (Which means risk they don't even know about, because they haven't calculated it), when they can- for free and pretty easily.

Short version- there are 2 "team members" every new investor should loop in ASAP to be financial guides and help paint the financial road map of where you are and where you need to be- and what your financial expectations can realistically be for when you proceed.

1) A great, seasoned full time local mortgage broker. As with any professional- there are a lot of them, but 5-10% of them are those you want to work with.

2) A great, seasoned full time local investor savvy realtor. Again, there are a lot of them, so be extremely picky.

A pro tip- the realtor can recommend a top local mortgage broker. A few phone conversations later with the 2 above teammates and you will confidently have answered your questions- and be on your way, using your new "road map".

Good luck!