If you think student loans can stop you from buying a house, you’re mistaken. It’s entirely possible to be a homeowner even if you’re still paying down student loan debt. Read on to find out how.
Getting an education is part of the American dream. Yet the costs associated with a college education can become a nightmare for those who are saddled with student loan debt. In fact, in 2017, the average amount of student loan debt was $37,172.
Because of high levels of student loan debt, many graduates put off buying a house thinking that they wouldn’t be approved. The good news is you can buy a house even if you have student loan debt. Here are some strategies for making it happen.
Know what you owe. Read the fine print and know all the terms of your student loan repayment agreement. Make sure you know how much your payments are, when they’re due and when you’ll be finished paying the loans off. Then write a list of all of your other debts so you can get a better understanding of your financial picture.
Evaluate your student loan payment plan. When it comes to your student loans, you might be able to adjust your payments. For example, if you have federal student loans, you may qualify for an income-driven repayment plan, which lets you make a payment that you can afford.
Understand how lenders view debt. When lenders are deciding whether to approve someone for a home loan, they’re not expecting you to be debt-free. Rather they want to make sure that the debt you have is manageable. They also want to know if you’ll be able to easily pay your debts as well as the new mortgage. If you can’t eliminate your debt completely, your goal is to get it down to a manageable level if you want to buy a house. Not sure what constitutes a manageable level? A homeownership advisor can tell you.
Examine your other debts. If you have a high amount of student loan debt, it will likely take time to pay it off. While you make your student loan payments, can you focus on paying off other debts such as credit card debt or your car? Decide on one thing you can sacrifice, whether it’s a meal out per month or a daily coffee habit, in order to add a little more to your debt payments.
Strengthen your credit. Lenders are looking at the complete picture. Student loan debt could be perceived as a negative so make sure you accentuate your positives. You have the power to build a high credit score by making on-time payments and using debt responsibly.
Find steady income. Focus on your earning power. Whether you score a promotion or build a lucrative side hustle, an increase in income can help you pay off your debts sooner.
Get educated about the homebuying process. While you’re taking the steps mentioned above and getting your finances together, take a homebuying class and visit a homeownership advisor. An advisor can share information about resources that can help you come up with money for a down payment or improve your chances of getting the best mortgage rate possible.
Getting an education is something to be proud of, and it shouldn’t limit you from achieving your financial goals. Student loan debt does not have to stop you from being a homeowner. Take the first steps to homeownership today.