How to Buy a Home Even With Student Debt

Buying a house is a major life milestone and, for many people, a financial burden. A couple of generations ago, the next step for most steadily employed recent college graduates bringing home a decent paycheck was to settle down and buy their first homes. Today, however, that is not a sure path. According to the National Association of Realtors (NAR), about 80 percent of millennials don’t own a home, and most of those say student loan debt holds them back from purchasing one. Nonetheless, with early and careful planning, buying a home is possible even with student debt. A realtor in Gainesville, FL, can provide advice tailored to your financial situation and guide you through the process.

Improve Your Credit Score

Credit score is one of the main factors lenders consider when deciding whether to let you borrow money. Fortunately, it’s possible to have a good credit score even with student debt as long as you don’t miss payments. Build a strong financial reputation by paying all your bills in full and on time, maintaining your credit utilization at 30 percent of your available credit (or lower), keeping old credit accounts open (if they’re in good standing), and using several types of credit (such as credit cards and various installment loans) to show you can handle different types of debt.

Decrease Your Debt-to-Income (DTI) Ratio

Another way to prepare for a mortgage application is to make sure you have a decent DTI ratio. Lenders will use it to determine your ability to make monthly payments. Many lenders follow the 28/36 qualifying ratio, which means you should spend no more than 28 percent of your gross monthly income on total housing expenses and no more than 36 percent on total debt service (including the new mortgage payment). Although some lenders may still accept a higher DTI, try to reduce it by paying down some of your debt or increasing your income through a raise, second job or side gig.

Save for a Down Payment

If you have eyes on a home for sale in Gainesville, FL, assess your current financial situation, including total expenses, and start saving as much as you can, as early as possible. Take advantage of local down-payment assistance programs or federal loan programs. For example, the VA mortgage (for veterans) and the USDA home loan (for properties in rural areas) don’t require down payments. If these don’t apply to your case, you may qualify for a Federal Housing Administration (FHA) loan, which requires a down payment of 3.5 percent. Many lenders today offer conventional loans with down payments as low as 3 percent for people with good credit.

Talk With a Lender or Adviser

Schedule an appointment with a lender or adviser well-versed in Gainesville real estate. A lender can check your credit history, current debt obligations and other expenses to determine the amount of money you are qualified to borrow for a mortgage. Many lenders are aware of how widespread student loans are and have made favorable changes to how they can be calculated as part of a borrower’s overall DTI ratio.

Be Realistic About Your Finances

Although there are many ways to obtain loans even with student loans, ask yourself how confident and comfortable you truly are with your income and the idea of adding a large amount of debt to existing debt. Before applying for house loans, factor in both the amount and total time you have left to pay off student loans. Be sure of exactly how much of a mortgage payment you can handle to avoid getting get stuck in a situation that stretches you thin.

Rely On Gainesville Real Estate Professionals

Working with a realtor is crucial to finding a home that fits your needs. Real estate agents with Team Dynamo stay up to date with market conditions, trends, regulations and developments. We can find Gainesville, FL homes for sale within your budget and negotiate on your behalf to speed up the process. Call us today, and let us help you buy your dream home.