Buying a Home When You Have Student Loan Debt

With record levels of student loan debt, today’s younger generations are struggling financially. They can’t save as much as they’d like, they’re saddled with years upon years of repayment, and, what’s worse, they’re dealing with ever-rising home prices that make things even harder.

So how are these up-and-comers supposed to become homeowners? How can they get past the crippling debt and start building wealth and putting down roots?

For those in the midst of these struggles, it can certainly seem like an uphill battle. But as the growing number of millennial homebuyers have shown, it’s not impossible. All it takes is some dedication, a little financial know-how, and the right help, and buying a home can be not only possible — but affordable, too.

Are you looking to buy a home despite your student loan debt? Here’s how to do it:

  1. Know the difference between fact and fiction. The first step is to steer clear of old wives’ tales and myths that will only drag you down. Despite what many believe, you don’t need a 20% down payment to buy a house. In fact, you really only need about 3% in some cases. You also don’t have to go with a 30-year loan — the most common mortgage product out there. There are lots of options and ways to creatively structure your home purchase so that it’s affordable both now and month-over-month.
  2. Join forces. The right partners can help you achieve your dreams of homeownership more easily — especially if you’ve got loads of student loan debt. If you can, consider buying with a friend, significant other or roommate, or co-borrowing with a parent or family member. Their credit histories plus added income might qualify you for a better mortgage rate or a bigger home purchase, so get help when and where you can. You should also join forces with a great loan officer who specializes in first-time buyers. They’ll be able to walk you through all of your financial options so that you can choose the absolute best one for your financial situation and goals.
  3. Work on your credit. Debt doesn’t necessarily mean you have bad credit — even if you owe a lot of money. As long as you pay your bills on time, every time, debt can actually help your score, especially if you’ve had those accounts for a long while. If you know home buying is on your radar, make sure to settle any collections issues and set up auto payments so you never miss a deadline. One mistake can make a big difference in your credit score — and the mortgage rate you qualify for.
  4. Choose the right mortgage loan. The 30-year fixed-rate loan isn’t your only option, and if you’re dealing with lots of debt, it’s probably not your best one either. There are a number of loan products you can choose from, each with varying lengths, interest rates and down payment requirements, and honing in on the right one is key to affordability. This is, again, where a great loan officer can come in and make a difference.
  5. Choose the right property and location. Home prices — and the monthly payments that come with them — vary greatly across the country. If you’re working within a certain budget, it’s important to do your research and find the best spots for your financial situation. Use a mortgage calculator to determine what you can afford on a monthly basis, and then use that number to hone in on the appropriate price range for your home search. Then find the markets and locations that fall into that. Generally, suburban homes are going to be a little more affordable than those in busy urban centers. And homes along the West Coast and in the Northeast are generally more expensive than those in the South and Midwest. Find a good real estate agent who can point you toward areas and communities within your budget.
  6. Save what you can. You may not need 20% down, but you will need a little to cover your down payment and closing costs. Saving thousands of dollars a month is likely out of the question, but make an effort to save what you can, when you can. Cut out that morning Starbucks run, and funnel it right into savings. Withhold an extra $50 from each paycheck and put it right into your down payment fund. You can even use saving apps like Acorns or Digit to automate it all for you.

When you’re dealing with hundreds in student loan payments each month, the idea of buying a home can seem impossible — but trust me, it’s not. Do you want help finding a route to homeownership that fits within your financial limitations? Then contact a loan officer at Embrace Home Loans today. We’re here to help.

By |2018-11-28T11:04:48+00:00November 28th, 2018|Categories: Purchase|Tags: , , , |

About the Author:

Aly J. Yale is a mortgage and real estate writer based in Houston. Connect with her at AlyJYale.com or on Twitter at @AlyJwriter.

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