How Do Student Loans Affect Home Buying?

How do student loans affect buying a house?


Owning a home is a major milestone in a person’s life. Imagine the freedom that comes with it. You can design it however way you choose. You can inscribe anything on the wall without getting scared that the old major, homeowner, will call the lawyer. You can add any picture gallery, illustrations which you can use to recite the popular Annabel Lee poem with the kids, asking them the lessons they learned from studying the story of an hour and other novels. You can also revise any book essay example with them. Indeed, home buying is a great choice.

In 2019, everyone wants to own a house and live the American dream. But there are hindrances, one of which is student loan debt. How do student loans affect buying a house? Here is how:

It increases the debt-income ratio

When you eventually become a homeowner, you will find mortgage loan payments a constant struggle to peddle with. Aside from this, your debt to income ratio will be on the rise. Buying a home with student loan debt affects your ability to qualify for a loan. Even if you qualify, it may be for a small percentage of the actual amount you applied. Your debt to income ratio is computed using your monthly debt payments. Lenders compare this with your pretax income. If it’s high, you would be approved to take a loan, but when it’s low, access to a loan will be denied.

Lowers credit score

Generally, student loan debt reduces your credit score rating, especially when you have missed a payment a couple of times before applying for a loan you want to use as a down payment. The only major thing that can trigger an increase is when you start building a clean record of prompt loan payment over time, it will increase gradually.

It hinders savings

Student loan payment affects your ability to make a down payment necessary for home buying. It could become worse when you are on a fixed income, and you can’t do anything to increase your income flow at the moment. After paying hundreds of dollars in debt, you won’t have much left to play towards home buying.

But the best part is student loans and mortgage doesn’t mean you won't be able to have your own home. You can still have a home only if you explore the many options available. Here are some of them.

Buying a home with student loan debt is possible

This is because research has proven that saving 20% as a down payment is not always compulsory. Agencies such as the Federal Housing Administration regularly offer mortgages that require a lower down payment. Also, there are many programs for first time home buyers in the U.S that offers mortgage down payments options.

If your debt to income ratio is on the high side, then you should consider paying off those debts with a higher interests rate. Ensure you don’t accumulate new debt. If you can pay one or two debts just before applying for a loan, you can reduce your debt to income ratio.

Lenders are interested in your credit score because it shows your history of loan payment over time. They want to know if you can pay your debt on time. But what if your credit score is bad? Is that the end? Not at all, you should focus on paying loans ahead of the due date regularly. If you do this consistently for a while, your credit score will shoot up, and you are good to go. Closing an existing credit card account is not the right way to boost your credit score because of the older your credit history, the higher your credit score.

Students loans and mortgage are a part of the financial records of many aspiring homeowners. But many only realize how bad it affects them when they want to buy a house. Hence, in a bid to get out of the mess, they resolve to the cyclical structure of going back and forth trying to find a way to fix it. The right information alongside a protagonist personality is all you need. It’s up to you to apply the suggestions here and see how well it works. Happy home buying!



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