On average, about 60% of college grads are riddled with student loan debt and the total number of student loan borrowers is estimated to be over $43.4 million. With such overwhelming debt on the shoulders of newly hired or budding professionals, owning their dream home may be a dream that they can only achieve after several years (once they have paid off their student loan debt).
However, a number of real estate and finance experts beg to differ. They believe that as long as you get your student loan payment plan in order, it would be possible to own a home earlier than expected. You just have to manage your finances well and learn to prioritize financial responsibilities. The following are some tips that you ought to keep in mind:
Start and Plan Right
After you graduate, you need to wait until the six-month grace period on your student loan has passed. Analyze and consolidate your student loans before looking for a mortgage. This way, you’ll be able to determine which mortgage you can afford on top of your student loans. Finally, create an income-based repayment plan that won’t use up a large portion of your income.
Minimize Your Debt
Mortgage lenders usually take into account your savings, debt-to-income ratio, credit score, and income before approving your loan application. To show that you have minimal financial obligations and you have the capacity to repay your home loan, pay off as much debt as possible and reach a debt-to-income ratio of 36% or less. In fact, it would be smart to first pay off your car and credit card debt prior to applying for a mortgage. A number of people even consider refinancing their student loans to lower their monthly payments.
Buy a home — even if you have student loans — with these 5 tips, USAToday.com