If student loan debt is keeping you out of the market for your first home, you’re not alone. According to the Project on Student Debt, 68% of graduates who received their bachelor’s degree graduated with an average of $30,000 in loans. However, just because you have student loans doesn’t mean you can’t also buy a home. Read on to learn how you can become a homeowner despite college debt.
Manage Your Loans Responsibly
Having debt on your record might seem bad at first glance, but when you manage that debt responsibly, it can actually help your credit score. The most important factor in your credit score is paying bills on time. Be sure that you are managing your debt, paying your student loan debt, other debt sources and monthly bills on time to keep your credit score up.
Don’t Close Existing Credit Accounts
After graduation, you might be tempted to close out all of the credit accounts that you accumulated over your college career so you can focus on paying off your student debt. Not so fast! You should of course avoid opening additional lines of credit, but closing credit accounts that you already have, especially if you are in good standing with that account, can negatively impact your credit. A long credit history works in your favor, and closing your accounts reduces the amount of credit you have available, which can raise your debt ratios and lower your credit score. Instead of closing these accounts, keep them open and if you use them, make sure you pay them off responsibly to improve your credit.
Shop for a Home Within Your Means
Even if you have great credit with your student loans, it is important to remember that these loans come with required payments that you will be handling for a very long time to come. When you are shopping for a home, make sure to include your student loan payments in your budget. For example, if your take home pay each month is $2,500 each month, but you owe $500 per month toward your student loans, you really only have $2,000 to work with monthly. Use that figure to decide what your budget should be, and stick to it!
Save for a Down Payment
It’s not all about that monthly payment—your down payment may be the largest expense you ever have. Generally, lenders like to see a 20% down payment to avoid paying private mortgage insurance, but if you are also paying off student loans, you might not be able to save that much at once. Fortunately, there are mortgage products out there might help.
The NC Home Advantage Mortgage™ offers down payment assistance and lenders statewide, and has a smaller down payment requirement. With this product, you can pay no money out of pocket for your down payment, or give your existing down payment savings a boost. Learn more about how the NC Home Advantage Mortgage™ can help make home ownership affordable for you, despite your student loan debt, at www.nchfa.com/home-buyers.