by Laura James, Fairmont Agency
Raise your hand if you have student loan debt. ME ME ME!!! As a lawyer in a past life, I have a LOAD of student loan debt. And I know I am not alone in that. When compared to past generations, the millennial generation is the most college educated. And for many, college education means debt. While student debt poses a significant hurdle to home ownership, there are things you can do to make it easier. Here are our best tips for buying a home with student debt:
FOCUS ON YOUR CREDIT SCORE
Student debt may not be the only hurdle you have to buy a home. Your credit score could also hurt your chances. Your credit, or FICO score, is what’s used to determine not only if you qualify for a mortgage but also the amount and at what interest rate. If your credit score is too low or you have a credit history that’s plagued with late payments, then you out of the running for a mortgage.
Another thing to consider is that even if you do qualify for a mortgage with poor credit, the monthly payments may be higher than you can afford. That’s why our first tip is to work on building and repairing your credit.
WORK ON YOUR DEBT-TO-INCOME RATIO
Another factor looked at when applying for a mortgage is your debt-to-income ratio. This number is used to determine whether you can afford to carry the additional debt of a mortgage payment. Essentially, can you pay your mortgage every month?
To raise the ratio, you’ll want to increase your monthly income and lower your debt. You can focus on one or the other, but we recommend doing both. Taking a side gig to earn a few hundred a month and using a portion of that to pay off debt can make a BIG difference pretty quickly.
RESEARCH DOWN-PAYMENT PROGRAMS
Even with student loan debt, there several down payment assistance programs that you may qualify for. Government loans like FHA, USDA, and Veteran home loans have many perks, including down payment assistance. USDA loan even has zero-down mortgages!
APPLY FOR A MORTGAGE
This tip may seem out of place, but there’s no better way to know how close you are to buying a home than to apply to see where you stand. When you get pre-qualified, you get a better picture of your financial standing. You can also get personalized guidance as to what would make the most significant impact on your home loan-worthiness.
Whether student debt, credit debt, bankruptcy, or poor credit, having the answers to your homeownership obstacles puts the power back in your hands. When you know the big picture and a solid plan based on facts, you’ll see how close you actually are to buying a home. Who knows --you may qualify for a low rate RIGHT NOW.
FAIRMONT FINANCIAL
At Fairmont Agency, we are super lucky to partner with Fairmont Financial. Fairmont Financial, has been helping customers afford the home of their dreams for many years. They offer clients the lowest possible rates, and most cost effective loans in the industry. Further, their goal is to close all loans in 15-20 days. Click here to check out Fairmont Financial.