My cousin and her husband are looking into building a home for around 300k in Ohio. 4 bedrooms and 3 baths in a nice suburban neighborhood. She is a stay at home mom of three kids, and he works in engineering making about 70k a year. With the income alone I don't think they could afford it, but anyways she thinks they can. They have 40k in credit card debt and 80k in student loans, and no car payments. They just sold their current home, and paid off the car with that money. They are now living in a nice apartment community until they can build their house. She said they have about 10k in savings, but they do not want to put that down and keep it for emergencies. She said she believes with a new construction loan, she won't need to put anything down and can even consolidate her credit cards into the loan. I think she is nuts.

Maybe I am old school, I thought you could only get approved up to around 2.5 times your income less debt. 70k times 2.5 - the 80k and 40k is a 55k house. I don't know much about new construction or if the rules changed. What do you guys think?

smellymeow said:My cousin and her husband are looking into building a home for around 300k in Ohio. 4 bedrooms and 3 baths in a nice suburban neighborhood. She is a stay at home mom of three kids, and he works in engineering making about 70k a year. With the income alone I don't think they could afford it, but anyways she thinks they can. They have 40k in credit card debt and 80k in student loans, and no car payments. They just sold their current home, and paid off the car with that money. They are now living in a nice apartment community until they can build their house. She said they have about 10k in savings, but they do not want to put that down and keep it for emergencies. She said she believes with a new construction loan, she won't need to put anything down and can even consolidate her credit cards into the loan. I think she is nuts.

Maybe I am old school, I thought you could only get approved up to around 2.5 times your income less debt. 70k times 2.5 - the 80k and 40k is a 55k house. I don't know much about new construction or if the rules changed. What do you guys think?

She's not ready. Get the student loans paid off and the CC paid off. Save up 20% and have a mortgage of no more than $1200 (25% of her take home pay).

She should throw $1500/month (similar to what a mortgage would be) at her CC and student loans. With no interest she should be ready to start saving the down payment in about 80 months.

A while back I considered buying a home. After getting input from FWF, I realized it just wasn't within reach yet. I think people just like the idea of owning a home, and don't see clearly that it's not in their best interest.

70k in income, 120k of debt (including 40k in presumably high interest credit cards), three kids and they want to borrow another 300k? Incredibly bad idea IMO. They shouldn't even think about buying until they've paid off their credit cards and can put down a real down payment.

No way. In today's mortgage crisis, nobody will even give them a loan with less than 10% down (30k).

Waiting to buy until you've paid off student loans (as long as they are Federal loans) is pretty foolish. Waiting until the CC is paid off is not.

BlueEyesAustinTexas said:Waiting to buy until you've paid off student loans (as long as they are Federal loans) is pretty foolish. Waiting until the CC is paid off is not.

Honestly, its not that foolish. All these people who assume that federal student loans are what they used to be don't realize they are reaching new levels. My wife's private loan is 6.0%, and her federal is 6.5%. At those rates it wouldn't be a bad idea to try and pay them off before getting a house.

Our current plan is to be completely debt free in 5 years, and then save one more year for a house. It sucks, but at least I won't feel overwhelmed with debt.

there is no way they can afford it!!!
they better pay off those loans and credits first and then start thinking about the house!

Ha - How's this for back of the napkin

Gross Pay 70K
Taxes -25K
Housing -25K
Debt Payments -20K

Forget it. Anyone who would lend them 300K deserves the losses from the impending bankruptcy.

Dumb people.. they're everywhere. Just trying to keep up with the Jones' I guess!!!