Most college students require some kind of financing to complete their degrees. Student loan debt is a serious commitment, one which can take up to 20 years to repay. But having a student loan does not mean you will be unable to buy a home, in fact, lenders are prepared for this kind of debt and can help you find a loan program that suits your needs. Before you postpone homeownership, talk with a lender and plan for the purchase; then follow these 5 tips to make sure your search is successful.
- Understand Your Budget – Shop for a home you can afford. First-time homebuyers might not be able to buy a huge home with a pool. Be realistic about your monthly debt and be prepared to buy in your price range.
- Reduce Recurring Debt – As you begin to plan for your home purchase, pay down credit card and auto loan debt. These additional debts drain your credit and your monthly paycheck.
- Lower Your Student Loan Payments – Consider ways to reduce the monthly cost of your student loans. Consolidation and refinancing are great ways to reduce the interest on loans and lower your monthly payments.
- Pay On Time – This rule applies to all your debt, but demonstrating responsibility for your loans helps lenders see you as good borrowers and could lower your mortgage interest rate.
- Save a Little Longer – A larger down payment will help reduce the monthly cost of the mortgage; if you can save for 20% down, you will also save in Private Mortgage Insurance which is added to all loans with a high Loan-to-value.
Having a student loan does not prevent you from buying and owning a home. Talk to a lender and learn about your unique situation and create a strategy for accomplishing your homeownership goal.