Rhianon Borg
August 2018

Owning a Home is Still Achievable Despite Student Loan Debt

Owning a home is a dream shared by many Americans and what better way to achieve that dream than landing a great job? Unfortunately, most high paying jobs require a degree in higher education- and a degree in higher education isn’t cheap. It seems to be a circular problem: you need money to get an education and you need money to buy a home! Fortunately, student loans are available to help you get into college, but what happens when it’s time to repay that loan? Many borrowers feel daunted by the monumental obligation of paying off their student loan debt and feel as though their chances of ever owning a home get slimmer every day.

Student Loan Debt Hurts Debt-To-Income Ratio

According to the Federal Reserve, a 10 percent increase in student loan debt causes a person’s chance for homeownership to drop 1-2 percentage points during the first five years after graduating. The National Association of Realtors credits the debt-to-income ratio (which includes student debt) as the most common reason for a person to be denied for a mortgage.. Having a higher student loan debt certainly impacts your ability to own a home. In 2017, the median debt was $41,200!

Making Loan Payments Negatively Impacts Financial Wealth

In addition to increasing your debt-to-income ratio, making payments on loans can affect your financial wealth. Making a down payment on the house of your dreams becomes that much harder when you are saving less money because you are making loan payments. Saving money for a down payment on a home can take a very long time when trying to also account for regular loan payments, daily living costs, and unexpected expenses.

Late Payments May Damage Your Credit Score

Yet another way that student debt can possibly damage your chances of owning a home is the negative impact it has on your credit score when you do not make loan payments on time. While making timely payments helps, late payments can hurt your credit score, further reducing the chances of pre-approval for a mortgage.

Income-Driven Repayment Plans Offer Relief

With all these factors that make buying a house difficult, how can you pay off your debt and still be able to buy a house? If you have a Federal student loan, the answer may lie in an income-driven repayment plan. These plans are essentially a “sliding-scale” plan that will reassess your loan payment amounts by taking into account your total income and your family size. A lower loan payment will most likely make a big difference in the amount of money you’re able to save for the down payment!

Options are available to help

Most people do not realize that there are programs designed to help those who may be struggling with their student loan payments. Thousands of borrowers have trusted Ameritech Financial to be their advocate. Click here to find out what options are available. Our services could help you get back on track.

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Rhianon Borg

Rhianon is an Ansel Adams wannabe, a word-slinger, word-devourer, lover of creatures - and especially of all things cephalopod. She believes octopuses would rule the earth, if only they could develop a reverse scuba suit, allowing them to breathe on land and keep their squishy bodies hydrated. Rhianon graduated from Santa Rosa Junior College in 2017, in what may have been the longest pursuit of an associates degree in modern history. She spent so long in school, she collected three associates degrees along the way: psychology, humanities, and social and behavioral science; she also came out with a profound feeling that she has trouble making up her mind and focusing on one thing for very long, making blogging and short-format writing a great choice for her. Rhianon and her husband have a small-scale zoo at home and both have dreams of one day moving to the country, building a hobbit house with a self-sustainable farm, and housing much pygmy livestock.

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