There’s no doubt about it: Student loan bankruptcy can be a hassle for you if you want to buy a home that requires a mortgage. One study found that 75% of college graduates with student loans said their payment allowed them to buy a home or car.
Millions of graduates are struggling under such a load of student loans and credit card debt that the dream of home ownership may seem completely out of reach.
But that is not impossible. The tips in this article can help you buy a home, even with a student loan debt.
How To Get A Mortgage When You Have A Student Loan?
Here are 10 strategies you can use to qualify for a mortgage, even if you have student loan debt:
- If you have student loans of $ 10,000 or more, you may be able to consolidate at lower rates to reduce your payments and use savings to delay in the event of a home payment.
- Set financial goals for yourself that will help you focus on the big picture and skip unnecessary spending.
- Avoid Credit Card Debt. You have one or two major credit cards and pay off your balance every month. If you need to keep credit card balances, transfer them to lower rate cards whenever possible.
- Establish a record of timely payment of bills so that you do not damage your credit score, which is key to obtaining the best interest rates on mortgages, car loans and other loans.
- Check your credit report annually for irregularities and resolve them if any. If you are planning to buy a home, start reviewing your credit score at least six months before you start your house hunt and take steps to improve your score.
- Avoid taking new loans or applying for new credit cards in the months before you start looking for a home.
- Pay off as much debt as you can before you start hunting, which will help you qualify for a mortgage.
- Prepare a realistic budget and see if you can really manage your mortgage payments on top of your other debt.
- Save all the “found” money: income tax refunds, bonuses, surcharges and cash gifts, to go towards your expenses or closing costs.
- Consider a cheaper car and apply a payday difference to pay off credit card debt or save for your down payment.
What lenders want to see?
Borrowers warn that student loan payments in excess of 8% of your income are considered ineligible. Most students do not even calculate how likely their monthly payments will be when they borrow student loan money, which means they are shocked when they have to start paying off.
Keeping your payments at 8% of your income may look good, but 8% should be the total amount of your non-mortgage debt so you can comfortably afford your payments.
For someone, it costs $ 40,000 a year, that would be about $ 275 a month (to pay a student loan, pay a car, and pay for credit cards combined), at low interest rates. If interest rates rise, so will your future monthly student loan payment.
The best bet is to shave your dollars with your monthly payments whenever you can.
If you are still in school, read this
Advanced planning, careful spending, and making as much money as possible at school can help limit the burden of student repayment.
Be careful about how you spend your student loan money. Tuition, room and board, and textbooks are smart ways to spend money. Eating out, buying music and clothes, going on a spring break, or otherwise financing your social life are not the best ways to spend that loan.
Even if you do not directly use your student loan money for non-educational purposes, spending any of your money on extras means that you have less money for your education (and you may need to borrow more).
You don’t have to live like a pauper (it’s not fun for anyone), but try to keep in mind that every dollar you save (as in don’t spend) is a dollar less, plus interest, I have to borrow.
Remember that student loans will take 10 to 20 years to pay off, which means you will (indirectly) pay for those small extras for the next decade or two.
Financial aid, summer jobs, part-time jobs during the school year, hybrid loans and careful budgeting and spending can significantly reduce, and for some people, eliminate the need for student loans.