More than 44 million Americans struggle with student loan debt, owing a collective sum of
to date. Unfortunately, the cost of higher education doesn’t guarantee college graduates a high-paying job. As a result, many borrowers struggle to pay off their student loan while daling with other expenses such as basic needs, car payments, and rent. For many, student loan debt also hinders them from buying their first house.
However, buying a house when you have student loan is not impossible. Here are some of the steps you can take to afford a home while paying off your student loan:
1. Improve your DTI
Utah has thelowest average studentloan debt, with a value of $18,838. As a result, getting a Utah mortgage is relatively easier if you have low student debt. But if this isn’t the case for you, you can improve your chances of getting a mortgage loan by decreasing your DTI (debt-to-income) ratio. This can be done in several ways:
- Get more streams of income.Increase your income by working for a promotion or asking for a raise at your current job, starting a small home-based business, getting a second job, doing freelance work, selling your assets, etc.
- Consolidate your student loan debt.You can lower your monthly payments if you refinance or consolidate your student loan debt, which will consequently lower your DTI.
- Pay off your debts.Pay off your existing debts with the goal of minimizing them as much as possible. It’s recommended that whenever you come across extra money, use it to make dents to your debts.
2. Avoid additional debt
The worst thing you can do when you’re trying to get a mortgage is to take on additional debt. Avoid taking out loans, racking up your credit card bills, and buying expensive things on installment.
3. Improve your credit score
One of the most important things that mortgage lenders look at is a borrower’s credit score. If you have a good credit score, they will be more willing to let you borrow a higher amount with lower interest, since you are seen as a low-risk borrower. You can improve your credit score by:
- Paying your bills on time (credit cards, student loans, car payments, etc.)
- Use less of your credit
- Leave paid-off and long-standing accounts open
- Check your credit report frequently
- Avoid maxing out your credit cards
4. Look for assistance
There are several federal programs that can help you buy a house, such as FHA loans, VA loans, USDA loans, and conventional loans. Each type of program has a different set of qualifications and requirements, so be sure to check them out to see if you can apply. Mortgage experts like Spearmortgage can also assist you, especially when you’ve been turned down by the bank.
With the growing student debt crisis, it’s not looking bright for millennials who want to buy their own homes. But with these tips, you can start working towards your dream house even while paying off your student loans. It will just take a little more grit in the current economy, but it’s achievable.
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