How to Overcome Student Loan Debt When Buying Your First Home
It is true that outstanding student loan debt can make buying a home more difficult. Yet, there are some steps you can take to overcome your student loan debt when applying for your first mortgage. Most importantly, the lender will be looking at your credit score and your debt to income ratio, so it’s important to work on those two things first.
Here are a few alternative solutions and things to consider when thinking about purchasing a home while you’ve still got student loans:
#1: Try a graduated savings plan. You need to have money for the down payment and it looks good to banks to have money in savings. In your budget, take a portion of your discretionary funds and put some towards student loan debt and the other towards savings. It can be as little as $100/month for the first year. The goal is to pay down the student debt while creating a savings plan.
#2: Try looking at distressed properties. Distressed properties are often a great option, particularly for those who aren’t afraid of tackling a few DIY projects on the weekends. Doing so is a great way to save on the purchase of your home.
#3: Try increasing your income. When your income to debt ratio is balanced, you are showing your ability to make certain payments. Keep your debts low and your income high. Don’t get into new debts and try to pay off those smaller debts. Maybe you take a few extra night shifts or helping local elderly as a part-time job. Just make sure you’re strategizing ways to increase your income and pay down your debt.
#4: Try a different city. Do you live in an expensive city? Would you consider one that is more affordable? Look at all your options. Sometimes just changing the neighborhood or considering living just a few minutes outside of town can make a great difference in the amount of home you can purchase.
With any type of financial goal, you have to know your options. Depending on your student loans and their status, you may or may not qualify for certain home loans. Talk to a mortgage professional today who can provide you with a timeline and help you strategize so you can reach your goal of home ownership.
Powered by HomeActions for Laura S. Rossinow, Broker, Keller Williams Realty, Newton, MA