Robert and his wife, Irina, are considering buying a house. He has recently begun a new job and he earns $40,000 a year. Irina is a contract worker for a publishing company, and though she brings in $30,000-$40,000 a year, her income is not as stable. Together, Robert and Irina have about $10,000 in credit card debt, $80,000 in student loans, and a car loan with an outstanding principle of $9, 500 at an interest rate of 5.75%. The rent for their apartment is $1,000 per month. Irina thinks paying rent is like throwing money away. Instead of rent, she would rather that money go towards a mortgage. She also says her mother will loan them $10,000 for a down payment on a house. Even so, Robert is concerned that buying a house in this economy is too risky. He wants to pay off more of their debt before buying a house and wait until the housing market stabilizes. Irina disagrees, saying that now, when housing prices are falling, is the best time to buy a house.
In the role of Robert and Irina’s financial advisor, compose an e-mail to Robert and Irina in which you recommend a course of action to them. Should they buy a house, like Irina urges? Should they pay down debts and wait to buy a house? Or might there be a different approach?