Don’t Let Student Loans Hold You Back From Buying a Home – Video
Amidst the student loan debt crisis, young graduates are entering the job market with thousands of dollars of debt. To many of those burdened with student loans to pay back, buying a home may seem out of the question to some, absolutely insane. Last year, the American Student Assistance foundation conducted a study on recent graduates who were burdened with student loan debt. When asked on how their student loans factor into their decision and/or ability to buy a home, more than half of borrowers say that their student loans agree that their loans create a burden that may hinder their chances of purchasing a home. However, there are ways to buy a home even while being shackled to student loan debt.
The most important factor to consider when shopping for a home, is to determine what you can afford. Planning out a budget is crucial to the search for a home. When burdened with student debt, it is safest to select a home that is budgetfriendly. Setting realistic standards for a potential home makes the decision easier and more reasonable.
Another step towards affording a home while paying back student loans, is to reduce the amount of debt in other aspects of your life, such as credit card debt and car loans. Pay off any credit card debt before taking out a loan for a home. By establishing better credit, mortgage lenders will be more likely to approve your loan. Lenders prefer to work with responsible borrowers with a debt to income ratio of 36% or less, which includes the monthly mortgage payment.
The best way to become a responsible borrower is to lower your monthly student loan payments. Some borrowers opt for refinancing their student loans. However, by doing so the federal loans become private loans, which are handled by private lender companies. Unlike federal student loans, these private loans are less forgiving along with higher interest rates. A safer avenue to take is to enroll in an incomedriven repayment program. These programs suit your monthly payments according to your income. Keep on top of your monthly payments and not only will your credit score look good, but the mortgage lenders are more likely to approve you for a loan.
Before purchasing a home, be sure to save up enough money for the down payment and closing costs. Paying more upfront will save you money in the long run. Websites such as Zillow have helpful information about what you need to know about mortgages before you borrow.
With these steps, it is possible for a graduate with student loans to buy a home. Like any large expense, it is not easy. The better prepared the borrower is, the better chance of success they have in buying a home.
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