Want to Buy a Home but Still Have Student Loans? Here’s How.
The cost of a college education has steadily risen and forced many young potential homebuyers to face a financial challenge unknown to generations before them. While bearing the burden of monthly student loan payments, many 20- and 30-somethings worry that debt which could take a decade or more to pay off will affect their credit and make purchasing their first house unaffordable.
Mortgage lenders work with many homebuyers who have student loans. If you find yourself in this situation, the most important thing to do is to continue making all of your debt payments on time. Don’t try to pay off your loans right now at the expense of saving money for your down payment. Student loans often have an advantage in that interest rates are low and don’t have the same financial consequences as other types of debt if you pay just the minimum over an extended period of time.
However, you should limit or eliminate other debt, especially credit cards. Now is the time to tackle those balances in order to improve your total debt-to-income ratio and your overall credit score. Keep in mind that accounts in good standing can help your credit, so keep them open. Learn more about how your credit score impacts the total cost of home ownership.
When the time comes for finding a new home for you and your family, get pre-approved for a mortgage. That first step will make house hunting an easier experience, especially when you are taking on another major expense in addition to student loan debt. Knowing what you can afford will help guide you.
We know it’s tempting to go big when your heart is set on your dream home. But above and beyond the home price, don’t forget about home maintenance costs. Make sure your budget can handle unexpected — and sometimes costly — expenses that come with owning a house. Consider looking at ways you can upgrade or make improvements later on a home that actually costs less than you can afford. You may find that new construction homes can be more affordable in the long run, since they tend to incur far lower maintenance and repair costs.
Overall, student loan debt might postpone homeownership, but it’s far from a deal breaker. Take some extra time to save for a down payment, and if you decide you can afford it, aim to purchase sooner than later. The tax incentives and the chance to start building equity are great reasons to reach your goal of owning a home even before your loans are paid off. Subscribe to our email newsletter to stay on top of changes in the NH housing market!