After finally saving up enough money to use as a down payment, I decided that it was time to hit the market. I met with a lender, got pre-approved for a loan, and then started visiting different properties. However, I quickly realized that I didn't know as much about real estate as I would have hoped. I wanted to find a great neighborhood and know what to ask the professionals, but I could tell that I needed a little help. To point me in the right direction, I started working with a great real estate agent who was familiar with the area. This blog is all about educating the general public on real estate matters.
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Student loan debts can have an impact on every aspect of your financial future, including whether or not you are able to buy a home. Although student loan debts will not make it impossible to get a home loan, they can make it challenging. If you are planning to purchase a home in the near future and have student loan debts, here is what you need to know.
How Does Student Loan Debts Impact Buying a Home?
When assessing whether or not you are a good candidate for a home loan, lenders look at your debt-to-income ratio, or DTI. The DTI tells lenders how much income you need each month to pay off your debts. If you have a low DTI percentage, lenders are more wary of loaning money to you.
Your student loan debt is factored into how much debt you have monthly. If you have high student loan payments, this can eat away at what you have available each month towards other things, such as buying a home. As a result, lenders might feel you do not have the wiggle room necessary to afford a mortgage and home insurance.
What Can You Do?
Having student loan debts does not mean that you are not going to be approved for a home loan. What it does mean is that you might have to make some adjustments to prove to lenders that you can afford to make payments.
For instance, if you have high monthly payments, negotiate with your lender to make lower payments. By doing this, you can free up some income each month and put it towards homeownership.
If you have several student loans, you can consolidate those into one loan. When you consolidate the loans, you can get a low monthly payment and possibly negotiate a lower interest rate.
You should also talk to your real estate agent about first-time home buyers programs. There are many state and federal programs that offer such help with the down payments, closing costs, and even renovation costs. If there are any local programs available at the city-level, your real estate agent will also be aware of those.
In addition to these measures, you should seek pre-approval from a lender. Pre-approval gives you an idea of just how much you can qualify for and how much down payment you will need to purchase a home. When searching for a home, your real estate agent can ensure that you are only searching within your price range.
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