A lot of millennials have yet to purchase a home of their own. Studies have shown that this is mostly because of student loan debt. These debts have been holding back millennials from purchasing a home for two reasons. One reason being they have a higher debt-to-income ratio in which most lenders stay away from. The second reason is that it’s harder to save for a down payment while paying these loans each month.
Fortunately, while it may be difficult and a bit of a longer process, Waltham Real Estate Agents are here to say that it is possible to buy a home while still paying student loans. Here are the steps to take suggested by a Waltham Realtor to help you navigate the process of buying a home while still in student loan debt.
Step 1 - Improve Your Debt-to-Income ratio
The best thing you can do to improve your chances of getting approved for a mortgage loan is to lower your debt-to-income ratio. Waltham Realtors say that this is one of the most important factors that lenders look at when evaluating your application. This is because they want to make sure you have the income to pay your mortgage payment each month on time. Here are some ways to improve this ratio:
- Pay down your debts wherever possible. Work on shaving down not only your student loan debt but also your credit cards and any other balances you may have. Waltham Real Estate Agents suggest using tax refunds, bonuses, or any other extra money to make more of a dent in these loans.
- Increase your income. You can work to increase your income by asking your current job for a raise. If asking for a raise isn’t possible, consider a second job, side hustle, or freelance work. Any type of extra income can make a big difference.
- Refinance your student loans. Refinancing your student loans can help lower your monthly payment and interest fees.
Step 2 - Increase Your Credit Score
Credit scores are another thing that plays a big role in your mortgage application. Your credit score gives lenders an insight into how well you pay off your loans and debts. The higher your credit score, the more likely you’ll be approved for a mortgage says a Waltham Real Estate Agent. Make sure you are paying your student loans consistently and on time each month as this will help increase your score. You can also increase your score by:
- Lower your credit utilization rate. This rate is how much of your total available credit you’re using. The less available credit you’re using, the higher your score will be.
- Pay all bills on time. Make sure to pay every bill you have on time every single month. Late payments are simply not good for your credit score.
- Don’t close any credit cards. Another important aspect of credit is your credit history. The longer you have been building your credit the higher your score will be. Even if you have a card that is paid off and you don’t use it anymore, do not close the account.
Step 3 - Get Pre-Approved for A Mortgage Before You Look for Houses
Waltham Realtors always urge the importance of getting pre-approved before you start house hunting. Getting pre-approved before house hunting will give you more insight into what your budget is. Also, a pre-approval will show sellers that you’re serious about purchasing a home.
Step 4 - Consider Assistance for Your Down Payment
If your student loans and other bills are making it hard for you to save up for a down payment, there are other options available. Waltham Real Estate Agents suggest considering assistance programs to help you with your down payment. Do some research on assistance programs to see if you qualify for any and if they can help you!
Step 5 - Look into Loans and Programs for First-Time Homebuyers
It’s possible for you to qualify for first-time homebuyer mortgage programs in addition to down payment assistance programs. These programs help immensely by lowering interest rates and some require no down payment at all. These programs could be a big help when buying your first home if you have a ton of student loan debt weighing you down.
Contact a Waltham Realtor
If you’re a first time home buyer and still have student loans, contact a Waltham Real Estate Agent for assistance! A Waltham Realtor will take the time to sit with you to discuss your options and figure out what can work for you so that you are able to purchase a home! Fill out a contact form or give us a call to set up a time we can discuss your first-time home buying options!