How To Buy A House With Student Loan Debt – Anuj Chand Real Estate
It’s a great challenge for first-time home buyers to break into the housing market. With rent increasing and the scarce inventory of lower-priced homes, in addition to thousands of dollars in student loan debt, many think they are not in a likely position to become a homeowner. On the contrary to this belief, those with a bachelor’s degree interested in purchasing a home are rarely limited by their student loan repayment in their search. We’ll take a look at tips from experts in finance on how to acquire a mortgage while servicing a student loan at the same time.
Strategy to Diminish the Student Loan
In order to service the mortgage and pay off your student loan debt concurrently, you will need to have a strategy. With the snow ball method, you have the chance to take a forbearance period that allows you to take a break. This can help you clear off other small loans aggressively during this time. After this period elapses, you will have cleared the small debts you had, which in turn allows you to take on a mortgage and erase your student debt with traction.
OR, contact your loan administrator and request for a lower interest rate. This becomes beneficial as your monthly repayments for your student loan will be reduced allowing you to take on a low-interest mortgage.
Financial Plan to Pay Off Your Student Loan in Full
Every goal needs an action-plan to help you succeed. The same applies for your student loan – you must cut down on your other expenses. Doing so will allow you to have more monthly savings which enables you to make bulk repayments shortening the time to clear your loan. Suggestions on cutting expenses may be to split house bills (get a roommate), ride the bus rather than using Uber and cooking your own dinner rather than going to that 5-star restaurant you love so much.
Stay Within Your Budget
Sounds pretty obvious, right? Not so much- if you plan on applying for a mortgage while repaying your student loan debt, you must make sure the home you purchase is within your budget. You don’t want to be what we call “house broke” in the real estate world. Your mortgage lender will collect certain financial documents from you and analyze your debt-to-income ratio and then suggest a price of home you should be able to afford.
The home value should be based on your income in order to avoid being greatly impacted when taking on a mortgage while still servicing a student loan.
Should You Wait Until You Pay Off Your Student Loan Before Applying for Mortgage?
It is very possible to take on a mortgage while paying your student loan debt. How? There are many ways, but one may suggest you save less for retirement to build up your down payment for your new home. Another great feature many of us millennials are not using is automated savings contributions – it takes the legwork out of “having to save.” Proper planning will ensure success shall you decide to take on a mortgage while servicing your student loan.
My Student Loan Debt Is TOO SUBSTANTIAL
If this applies to you, my advice is simple: live below your means. Every millionaire entrepreneur will tell you that this is what it takes. In order to keep flexibility within your budget, you should live below your means until you’ve ‘made it.’
Keeping a positive attitude is also a huge, overlooked factor. You cannot give up. If you come up with a monthly budget (easier than it sounds) to help you allocate your resources to know what you are left with at the end of each month, you will feel a lot less stressed over the situation and more in control.
Setting a repayment deadline before the actual deadline is also a helpful tip.
Build a strong credit history through timely payments. Strive towards saving for a down payment and paying down your debts. Always keep your debt-to-income ratio in the back of your mind.
Your student loan does not have to hold you back from becoming a homeowner. It is of essence to balance your other financial goals with your student loan.
It really is all about your ability to balance. Set targets and figure out what matters most. Only you will know whether you should finish paying off your student loan debt to begin saving for a down payment or if you should extend repaying your student loan for a few more months and save for your down payment in the meantime. I advise clearing your outstanding credit debt before beginnning to save for a downpayment. In the end, don’t use your student loans as an excuse to not being able to afford a house.. set a plan, stick to it and reap the benefits.
– Anuj Chand, Realtor with Tremaine Real Living located in Grand Blanc, MI 48439