If you’re thinking about buying a home but concerned your student loan debt is going to be a barrier to your success, don’t worry. Although you may need to rethink how you go about buying a home with a lot of student loan debt, having these kinds of loans doesn’t mean you’ll have to give up on your dream. Check out these tips to help you realize your goals a lot sooner than you might think.
Ask for a pre-approval
Talk to your lender about the options you have before you ever go shopping. It’s a good idea to know exactly what your budget is and be sure you’re looking in the right price range before you see a million-dollar home you fall in love with and find out you can’t possibly afford. Doing this also looks better to potential sellers who will be happy to work with someone who has already been approved by a lender.
Work on your credit score: Having a massive student loan debt is definitely going to impact your credit score, but there are other things you can do to resolve this problem. Pay down balances you may already have on your credit cards. And as soon as you decide to start looking into buying a home, stop putting anything on credit for the time being. If you’re married or live with a family member who is willing, you may be able to be added to someone’s established and well-paid credit card as an authorized user. This will help your credit score, too.
Refinance your loans: This isn’t an option that works for everyone, and in some cases, consolidation and refinancing may actually end up making you pay more in the long run. However, if you’re worried about your student loan debt, it pays to talk to someone experienced about possibly refinancing and lowering your monthly loan payment. There are some programs that can do this for you with no problem, but there are also scams out there, so be sure to talk to a professional before you sign up for anything.
Improve your debt-to-income ratio: This term refers to the amount of money you earn per month in relation to the amount of money you spend per month. For example, if you make $3500 a month and your bills and other debt add up to $1260 per month, your debt-to-income ratio is 36%. This is usually the highest this number can be to qualify for a traditional loan. It can be a little higher if you’re getting a loan from the FHA. If you’re having trouble getting this number low enough, you can either refinance some of your existing debt, work to pay off some of your debt, or consider finding ways to make more money—such as a second job, if that’s something you’re willing and able to do.