Beginner investing: Pay off student loans or buy property?

[Ally Garcia]

am 28yrs old in LA working in marketing.

Right now I have about $20k in a high yield online savings and money market, and not exactly sure which I should focus on more - paying off student loans, saving to buy a house, or buy a smaller property like a condo now while interest rates are low.

So far I have been following a PIP plan:

P - Preparing for the unexpected by having an emergency fund 3-4 months of worth of living expenses (part of my $20k) and the proper insurance

I - Investing for the future by contributing 6% of my salary to 401k Roth after-tax (however unfortunately with no match)

P - And my only debt to pay off is my low interest rate student loans ($35k at 6.08% interest rate). I have no other debt! At the current rate I am paying it off I will be done in about 7-8 years (and I am also looking into refinancing for a better deal to find possible better options).

I also have a good high credit score so I want to take that to my advantage as well. I want to invest more in my future but I don't know which way to focus:

1. Paying off student loans more aggressively, most of my savings

2. Invest in a more diverse portfolio like Betterment, Wealthfront, or RealtyShares

3. Save more for a house and still pay my student loans but at a lower amount

4. OR take advantage the historic low interest housing rates and purchase a small condo before they rise (which will be around the election). As of now after my emergency fund, I have about 3-4% down of $450k (another part of my $20k), which I know is not ideal but I would want to take advantage of the low interest rates, plus I would be living with my boyfriend and brother who would be helping me pay it off/splitting it 3 ways.

If I do go this route and purchase something in 6 months which would the most cost effective way:

- Get a FHA with as little as 3.5% down, however it would hurt me that I could never cancel mortgage insurance, however at least it would be a tax-deductible expense when you itemize deductions on Schedule A.

- A conventional loan (also tax deductible) and try to take advantage of being able to cancel it with Automatic termination when my mortgage balance reaches 78% of the original value of the property (no appraisal) or Final termination when I reach the midpoint of my loan when it's interest-only product, have a balloon payment, or were given forbearance by my lender.

- Or avoid mortgage insurance altogether while putting no money down by utilizing a combo loan. If you keep I first loan at 80% LTV or less, and add a second loan of 20% or less, I can still obtain 100% financing without paying PMI. Along with that, I'll most likely snag a lower blended mortgage rate by splitting the loan up.

- I can look into the Bank of America No Fee Mortgage, a so-called no cost loan that doesn’t require mortgage insurance, presumably even if the loan exceeds 80% loan-to-value. The TD Right Step mortgage also allows a three percent down payment with no mortgage insurance required. However, these programs typically have the mortgage insurance built into the interest rate, so it’s not really free. Most homeowners these day opt for a second mortgage instead of doing one loan to avoid high interest rates and private mortgage insurance. The only real downside is the associated fees with a second mortgage, and the two separate payments.

So there are options to make it work if jumping on real estate is the best way to use my savings. Also, since I would be a first time home buyer I would work all the bells and whistles that come with it - including no closing costs. So I do not plan on paying that at all (I know of a lender that has done this for other family members who were firs time buyers). So should I get pre-approved now just to see where I stand so I can have a more realistic idea or no since it effects my credit?

I want to invest more in my future and I think now is a great opportunity for this since interest rates are the lowest it has been, but I'm not sure if jumping into real estate now is the way to go - or pay off student loans aggressively and get them out of the way or keep saving or invest in other systems. Looking for some serious direction.

Thanks again,

Ally