College commencement speeches have been delivered and diplomas handed out. It’s time for the real world which, for many graduating students, means tackling their student loan debt.
Having student loans won’t keep someone from buying a house, although they need to be comfortable with the idea of taking on a good amount of debt while still dealing with their student loans. Here are some questions to ask yourself!
What’s Your Credit Score?
One of the biggest factors lenders to consider is your credit score. The elements that make up your credit score are payment history, outstanding balances, age of credit history, new lines of credit and inquiries, and types of credit. What people may not realize is that you can have a good credit score even if you have student loan debt. Paying your bills on time and in full will keep your credit score healthy while also building a firm financial foundation. Using diverse kinds of credit, like credit cards and loans will show lenders that you can responsibly handle several types of debt. Also, avoid using more than 30% of your available credit in order to maintain good credit.
What is Your Debt-To-Income Ratio?
Mortgage lenders calculate your debt-to-income ratio to determine your ability to make monthly payments on the new mortgage. Debts can include anything from credit card debt to car payments and — you guessed it — student loans. To figure out your DTI, divide your total monthly debts by your household’s gross income, which is income before taxes. Multiply this number by 100, which gives you get a percentage. This is your DTI and the lower the percentage, the better. You can reduce your DTI by paying down some of your debt or by increasing your income. Refinancing or consolidating your student loans to obtain a lower monthly payment is another viable option.
What Down Payment Assistance Programs Are Available?
Adding a mortgage payment on top of your monthly student loan payments might seem impossible, but it’s not! Many states offer down payment assistance programs that you might be able to take advantage of when buying a home. It’s also possible to work through federal loan programs, even if you have student loans. You may qualify for an FHA loan, which would mean a low down payment. If you choose to buy in a more rural area, you might qualify for a USDA loan, which requires no down payment. Don’t forget about VA loans if you have served in the military! Talk to your lender about what’s available in your area and if you qualify.
Before you let your student loan debt stop you from getting a house, look at your options, do your research, and ask any one of our loan officers about your options for buying a home!