First time home buyers face a great challenge breaking into the housing market. Rent keeps increasing and the availability of low-priced homes remains limited. Add several thousand dollars in student loan debt to the scarcity of low-value homes and budding buyers are likely to be convinced that they are not in a position to buy. Based on recent research, those who have completed a bachelor’s degree and intend to buy homes are modestly affected by their student loan repayment in their search. In this article, we take a look at tips from financial experts regarding how to acquire a mortgage while at the same time servicing a student loan.
What repayment strategy do you have to get rid of the student loan?
The strategy you choose to pay off your student loan plays a great role in determining whether you will be able to service the mortgage and the student loan concurrently. For instance, if you decide to use the snowball method to service your loan, you have the chance to take a forbearance period that allows you to take a break. Such a break may then be used to clear off other small loans aggressively. Once the forbearance period elapses you will have cleared the small debts you have allowing you to take on a mortgage and clear off your student loan with traction.
Another strategy of paying off your student loan would be to requester your loan administrator to give you a lower interest rate. A low-interest rate on your student loan means your monthly repayments will be reduced thus making it easier for you to take a low-interest mortgage.
What financial plan do you have to pay off the student loan?
For you to pay off your student loan fast, you should come up with a financial plan to help you cut down on expenses. By cutting down most of your expenses, you will be able to have more monthly savings thus enabling you to make bulk repayments that will help you clear the loan in a short time.
To have more money left to repay your loan at the end of the month you may decide to use public transport instead of a taxi, have a roommate whom you split house bills with, and avoiding meals out.
Work within your budget
If you are currently paying a student loan and intend to take up a mortgage, you should ensure that you work within your budget; ensure that the home you buy does not stretch your budget. Your financier will check into your financial reports to determine your debt-to-income ratio then advice you on the amount you can borrow for the mortgage.
When taking up a mortgage while servicing a student loan, you should ensure that you get very affordable repayments that allow you some breathing space on your budget to address other needs. To avoid being greatly impacted when you take up a mortgage while still servicing a student loan, you should ensure the home value is based on your income.
Should you pay your student loan before taking a mortgage?
You can pay your student loan and take up a mortgage at the same time. However, it is advisable to work aggressively towards paying your student loan when you are fresh from college. Instead of moving into high priced apartments and taking car loans, you should focus on paying the student loan fast before you have children and start having other family related bills that may interfere with your loan repayment.
Should your student loan prohibit you from buying a home?
Having a student loan should not prohibit you from buying a home. You can decide to save for a down payment on a house while repaying your student loan by saving less for retirement, automating your savings contributions, and reducing large expenses. Buying a home while servicing a student loan can be made easy through proper planning.
Tips for those who have substantial student loan debts
One of the most effective ways of getting rid of your student loan while building your wealth and savings should be to live below your means. If you decide to upgrade your lifestyle, there is a possibility of losing the flexibility of your budget.
You also need to have a positive attitude towards repaying your student loan; don’t give up. Come up with a monthly budget to help you allocate your resources so that you know what you are left with at the end of the month; this helps you know whether you can increase your repayments.
You should also set yourself a repayment deadline so you that you work towards clearing the loan before the deadline is reached.
Advice to those who want to buy homes but are limited by student loans
If you intend to buy a home but currently limited by your student loan debt, you should strive towards building a strong credit history through timely payments. As well as improving your debt-to-income ratio by paying down your credit cards as well as other consumer debts. Strive towards saving for a down payment and paying down your debts.
Your student loan should not hold you back from buying a home. However, you are advised only to follow the path you can comfortable take on. It is of essence that you balance your student loan with your other financial goals. Ensure the home you buy allows you room in your budget to work towards other financial goals.
Finally, buying a home while still paying a student loan all lies in your ability to balance. All you have to do is set your targets and figure out what matters most. You should decide on whether you can extend repaying your student loan for a few more months to save for a mortgage down payment or finish paying off the student loan then start saving for a down payment when there is no strain on your budget. If you have credit card debt that is still outstanding, it is best that you have it cleared before you start saving for the house down payment. Having a student loan should not be a barrier to you owning a home.
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