For many, getting an education is the best way to move forward in life. Higher education can lead to new career opportunities and in many cases higher paying jobs. However, in recent years the cost of college and graduate degrees have skyrocketed. The high cost of education has led many to take out student loans. Around 40 million Americans are saddled with some amount of student loan debt. Paying off these loans can take time and take resources away from other goals such as buying a home. If you have student loan debt but still want to purchase a home, here are three tips.
Minimize Other Types of Debt
Getting your first home loan may be a challenge if you have a lot of student debt. However, it is possible. One thing that you can do is to minimize other types of debts such as credit card debt and car payments. Lenders take your debt-to-income ratio into account. Your debt-to-income ratio is the ratio of your monthly debt payments to your take-home income. Most mortgage lenders will not finance someone with a debt to income ratio of over 43 percent. If your student loans make up a large portion of your debt-to-income ratio, it's best to avoid adding to it by taking on other types of debt.
Consider Refinancing or Consolidating Your Student Loans
If your student loans are making it difficult for you to buy a home, refinancing or consolidating may help. There are many benefits to refinancing or consolidating your student loans. You can get a lower monthly payment, extend your repayment terms, and make it to where you only have one monthly payment instead of multiple. Both private and federal loans can either be refinanced or consolidated. In many situations, this will allow you to put more money toward a new home and lower your debt payments each month.
Save For A Down Payment
Another thing that you should consider doing if you want to buy a home while dealing with student loan debt is to save up for a down payment. A larger down payment will make you more attractive to mortgage lenders. There are also other benefits of saving up for a larger down payment. Putting down a down payment of 20 percent or more also allows you to avoid private mortgage insurance.
Buying a home when you have student loan debt can be a challenge but there are a few things that can help. Minimizing other types of debt will keep your debt-to-income ratio lower and make you more attractive to mortgage lenders. Refinancing or consolidating your student loans may also make it easier for you to afford your first home. Saving up for a larger down payment can also make getting a home loan easier.Share
30 June 2018
I always wanted to buy my own home and after saving enough money for a down payment, I decided that it was time. Before I started looking at houses, I talked with a loan officer about financing. I wanted to know how much money I could borrow so I could look at houses in that price range. I was very happy after my meeting at the loan company and I was ready to start house hunting. My name is Jarod Spangler and I'm now a homeowner. If you have the dream of owning your own home, I think you'll find my blog of help to you. I've documented my journey of saving money, securing a loan and purchasing a house. To help you become a homeowner too, I'm offering advice and tips of things that I've learned along the way.