Buying a Home, When You Have Student Loan Debt

Aug 17, 2018 8:45:00 AM

Finishing college, settling into the career of your dreams and finding your ideal home are “checklist” moments for most of us as we walk the path of life. Perhaps you’re looking to move away from the place you grew up and experience life in the big city, or maybe you’re hoping to find the perfect family town to settle down in. Either way, there’s no reason to let student debt slow you down when it comes to achieving your housing goals.

With careful budgeting and planning, you can invest in a home even if you have student loan debt. In fact, first time home buyers often quality for special deals. HUECU, for example, offers first time buyers a home loan interest rate discount of 0.125% plus $500 credit towards closing costs.

To help you on your way, here are a few more practical tips that will have you climbing up the property ladder in no time.

Know Your FICO Score

Having good credit is a necessity when it comes to getting a home loan; especially if you’re hoping for a good rate. To find out how your credit stacks up, head online to check your FICO score. These scores are easily accessible, and it doesn’t cost you anything to take a look. Your score is the result of a number of factors, including your payment history for utility bills, how many accounts you hold and the length of your credit history. The better your score, the better mortgage rate you can get – so if it’s not up to par due to student loan debt, you might consider improving your credit before buying a home.

Decrease your Debt with Freelance Work

Lenders will evaluate your debt-to-income ratio (DTI) to determine if you qualify for a mortgage. This is calculated by looking at your total monthly debt repayments and dividing that sum by your gross monthly income. In most cases, a DTI ratio higher than 43% won’t qualify for a home loan. To decrease your debt you need to earn more income – which can be easier said than done! However, with the rise of the “gig economy”, there are now more opportunities to take on freelance work. Check out gigging apps like Bellhops or Caviar and explore the options in your area for taking on occasional jobs that could help to lower your student loan debt.

Choose a Mortgage Plan That Suits Your Life Plan

If you’re still in the midst of paying off student loan debt, it’s a good bet that you’re looking for a long-term place to live, rather than a short-term investment property. Then again, if getting a leg up on the property ladder is your plan, that’s fine too – just make sure to choose the right mortgage for each of these different scenarios. A fixed-rate mortgage ensures consistent monthly payments throughout the longevity of the loan, making this a great choice for long-term homeowners. Adjustable-rate mortgages, on the other hand, offer a fixed rate to start and then a flexible rate thereafter, based on a number of economic factors. An adjustable-rate mortgage, therefore, can often be a good choice for investment properties, or anyone who plans on selling their home sooner rather than later.

Consolidate Your Loans

If you’re paying off multiple student loans or other loans every month, you may be able to consolidate all of these bills into a single monthly payment; sometimes with a lower interest rate. HUECU, for instance, offers consolidated loans for eligible borrowers, to simply the repayment structure and provide a little less hassle – and sometimes, less cost – every month. This can help hopeful homeowners reduce their student loan debt and create additional funds to spend on the perfect property.

Tags: Home Buying, Student Loan Refinancing, Debt Management, Budgeting