Buying your first home is always a challenge, especially when you have tens of thousands of dollars in student loan debt. Some young millennials are forgoing purchasing a home due to their loans, thinking that they won’t qualify for a loan with their mounting debt, making homeownership impossible. While many have those thoughts and continue the cycle of renting apartment after apartment, others have found a way out; the trick is to understand your existing loan debt and how it will work into your mortgage budget. Student loans shouldn’t stop you from buying a home, as long as you have a consistent income from a stable job and a good credit score. If you can afford a high rent while paying your loans, there is a good chance that you can also afford to pay a mortgage!  

How Do Your Student Loans Affect Your Ability to Get a Mortgage  

There are various ways your existing student loans affect your ability to obtain a mortgage; of course, they are different in every situation, so it is essential to review your finances with a loan professional. 

You Might Not Have Enough fora Traditional Down Payment 

You have heard it from your parents – you need 20% down to buy a home. Yes, this is still true in some cases, but now with extended loan types and various programs offered through different banks, credit unions, and brokers, you might be able to apply for a mortgage with less than 20% down. According to the National Association of Realtors, in 2019, the median down payment was just 6% for first-time homebuyers – drastically less than the traditional 20%! The best course of action if you think you have enough saved or just want to know how much you should save is to speak with a local mortgage broker to see what programs you can qualify for, then set a goal for how much you need to save for a down payment. 

Check Your Credit 

Request a credit report from one of the three major credit bureaus in the United States: Equifax, TransUnion, and Experian. Review your report and confirm that all of the information is accurate; there can be mistakes! Paying your existing loans on time and even a few days early, so you don’t miss the due date. One missed payment can haunt you for years to come. Having a good credit score opens endless doors for you as a consumer; make sure you do what you can to boost yours. According to FICO, an exceptional credit score is between 800-850, a very good score is between 740-799, a good score is 670-739, a fair score is 580-669, and a poor score is anywhere between 300-579.  

Try to Lower or Refinance Your Student Debt 

There are various options available to lower your monthly student loan payments with both federal and private loans. Federal loans offer the following methods: the standard repayment plan, graduated, extended, pay-as-you-earn, income-based, income-contingent, etc. Check with the originator of your loan to see if your specific federal loan can qualify for a particular payment option. Private loans offer deferred payments while in school or while engaged in military service or allow you to make interest-only payments for a period. Another option to consider is consolidation or refinancing your loans. Consolidation simplifies your monthly process and often lowers your overall interest rate; this is something you can check with a local loan professional about to see if you qualify. 

Live Simply While House Hunting 

This is easily the most crucial step in going from renting to owning a home – live within or below your means. To save money for your down payment, you should limit your expenses. This means living in a less expensive apartment than you can afford, foregoing eating out often, and limiting unnecessary shopping expenses. Doing this will add up over time to a sizable chunk of change that you can use as a down payment or aid in closing costs. 

Speak With Local Experts in Your Area 

Every situation in every area is different. The best first step you can make is to speak with a market professional like Anthoney Hanks with Beyond 404 Realty in Forney, Texas. Anthoney can help you connect with a trusted lender, title companies and find your dream home. What are you waiting for? Take the first step to stop renting and start owning in 2022!