College graduates have a lot to think about in terms of financial stress. Not only are the majority of graduates buried in inconceivable debt, but they must also take on the economic challenges of making big – yet necessary – purchases, such as a house. As someone carrying a large amount of student loan debt, adding more loans to your name can be scary, even when it is for a good reason, such as giving you and your loved ones a roof over your head. Still, you don’t have to be held back by the burden of your student loans. Instead, take charge of your circumstances and identify opportunities for saving and budgeting, despite the student loans in your name. Here’s how to do just that.
The Challenge of Buying a Home with Student Debt
Though the monthly payments and overall debt can be intimidating, you are not a prisoner of your student loans. A successful home buying process takes research and awareness. So, you must first understand the most prominent underlying issue with aiming to buy a home with student debt. As you prepare to purchase a home, you will need to monitor your credit. Your credit score is one of the core metrics of eligibility lenders will use in determining whether they will fund your purchase or not.
Part of what determines your credit score is something called your debt-to-income ratio. The debt-to-income ratio is quite self-explanatory, measuring the amount of debt you have in relation to how much money you make on a monthly or annual scale. When lenders review this aspect of your financial standing, they are aiming to measure the level of risk you pose as a borrower. Those with a large amount of debt will be deemed risky and may have fewer opportunities to borrow the money they need to purchase a new home.
It is for this reason that many college graduates are fearful of applying for a mortgage or attempting to buy a home altogether. However, there are a few things you can do to ease the burden on yourself.
Ways to Ease the Burden of Buying a Home with Student Debt
There are a few things you can do to make this process a bit less frightening:
- Government assistance. Though you may harbor a bit of disdain for Fannie Mae considering your student loan debt, you might find help via this avenue as well. Government-sponsored options include:
- Student Loan Cash-Out Refinance. Home-buyers will be able to pay down high-interest student loan debt while simultaneously refinancing for a lower mortgage rate.
- Student Debt Payment Calculation. Lenders will be able to see student loan information on credit reports, giving a better, more accurate reflection of your financial standing.
- Borrowing with a co-signer. A co-signer can significantly boost your chances of being approved by a lender.
- Hiring a mortgage professional. A mortgage professional will assist you in budgeting and planning, ensuring that you are not buried by either student loan or mortgage payments.
With the help of an experienced mortgage professional, you will not have to tip-toe around the reality of your student loan debt. If you’re ready to begin a positive home-buying experience, get in touch with an expert today.
