Student Loan Debt & Home-Buying

Buying a Home with Student Loan Debt?

More than 44 millions Americans are paying off student loan debt, especially millennials. But that hasn’t slowed down home-buying dreams. In fact, interest in home-buying has shot up for the age group show up a whopping fourteen percent in the past year!

Having student loan debt doesn't mean you can't buy a home—in fact, there are plenty of resources and strategies that buyers with student loan debt can utilize. If you have outstanding debt but are still want to buy a Fort Worth home, the Wilco Realtors are here to help.

Managing Your Payments

Having a clear idea of your finances is key in figuring out your price range. If you want to figure out your finances, here's what you need to do:

Debt-to-Income Ratio

Debt-to-income ratio is just a fancy way of saying how much you owe versus how much you make. Ideally, the ratio should be as close to 28:36 as possible. Mortgage lenders use this number to calculate what sort of payments you can afford, so the lower the better. If you're debt-to-income ratio is less than desirable, you might want to look into upping your income with a new or second job or refinancing your debts. 

Auto-payments

Want to impress lenders? Set your loan payments up for auto-pay. By doing so, you'll guarantee you don't miss any payments, which will also boost your credit score in the process. Plus, it's one less thing to worry about taking care of every month and helps keep your budget consistent and predictable. 

Loan Consolidation/Refinancing

If you have credit card debt and student loan debt, consider consolidating the two in order to simplify your payments. But before you do that, you should look into refinancing your loans. While you will have to fulfill a few criteria, student loan refinance lenders can offer interest rates around 2.5% to 3%, which is over a full percentage point under the national average. 

How to Keep Your Credit Score in the Green

  • Payments: Paying on time is critical to a good credit score. Set up autopay so you don't risk forgetting a payment.
  • Use: Try keeping your credit card use as low as possible—10% of your credit limit should be your aim.
  • Monitor: Soft credit inquiries won't hurt you score, so be sure to check it every so often to make sure everything's on track.
  • Accounts: Stick to one credit card, period. Opening new accounts will ding your score, since they won't have as much time to age.
  • Types: You might think credit card debt and student loan debt are bad to have at the same time. But actually, the more types of loans that you successfully pay off (auto, student, home, credit), the better your credit gets!

Down Payment Assistance Programs

There are plenty of local, state, and national assistance programs that can help you come up with a little extra money for a down payment, even if you have student loan debt.

FHA

A federal loan provided by the Federal Housing Authority, FHA loans can allow you to make a down payment as low as 3.5%, although you will need a credit score of at least 580 to be considered. 

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USDA

If you're buying a home in a more rural area, the you might consider a USDA loan. While you might not consider your area rural, the loan actually applies to a surprising amount of the country and offers a 0% down payment for some buyers.

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VA

Are you a current or former member of the armed forces, or married to one? Then you likely qualify for a VA loan, most of which only require anywhere from 0% to 5% down. 

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Mortgage Pre-Approval

Getting pre-approved for a mortgage might sound intimidating, but it's a great way to figure out exactly how much you'll be able to afford in a new home. And don't worry—you can still get pre-approved, even if you have student loan debt. 

First Steps

Before you head in for your pre-approval, make sure you have a good idea of where your finances and student loans stand. Check your credit report, ensure that it's error-free, and take care of any issues that come up beforehand. 

Gather Your Documents

When applying for pre-approval, you'll need a pretty hefty stack of documents. Gather things like pay stubs, tax returns, W-2s, bank statements, investment information, student loan information, a valid ID, and your Social Security number.

Meet with a Lender

Once you have everything ready to go, your agent can recommend a top lender in the area. From there, the lender will run all of your information, crunch some numbers, and get back to you with a number as soon as possible, typically around two weeks.

Ready to Buy a Home in Fort Worth?

Even if you have student loan debt, buying a home in Fort Worth is still possible. If you're curious about the resources available to you or how to get started on your home-buying journey, just give the team at Wilco Realtors a call. We're around to answer any and all of your questions along the way!

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