5 Tips for Buying a House with Student Debt
Having student debt really puts a pause on your life because it consumes a huge chunk of your money. If you are still studying then it takes up a lot of your time, too!
Many students don't buy their first house until they landed a job and have been working for a few years. By this time most of their friends have already been paying off a bond for a while and they are only just starting!
Students don't have to wait until they have their degree to buy a house and it is possible to do so whilst paying off their student debt.
Here are some helpful tips.
#1 - Make sure you have a healthy credit score
Your credit score is one of the main things that will determine whether you can buy a home. The higher your credit score, the more likely you are to get bond approval.
If you have a low credit score, there is no reason to panic. There are a few things that you can do to boost it.
First of all, you need to continue paying your loan back on time. If you have a credit card, don't rake up too much debt.
Pay it off on time and try your best to clear it. You should also avoid opening new credit cards or accounts.
#2 - Manage your debt to income ratio
Your debt-to-income ratio is your total monthly debt payments divided by your gross monthly income.
Along with your credit score, this is an important figure that financial institutions look at. It will help determine whether you can repay the mortgage every month.
Your debt-to-income ratio should be about 43% or lower for a financial institution to give you bond approval.
As soon as you pay off your debts and try to boost your credit score, your debt to income ratio will also start looking a bit better.
#3 - Refinance your student debt
It might sound counterproductive but refinancing your student loan will give you a financial advantage when applying for a bond.
If you have high student debt, your new lender will pay off your old loans and replace them with a loan at a lower interest rate. This will help you in saving money for a deposit on your new home.
Make sure that you get your credit score and your debt to income ratio on track first because this will help qualify you for refinancing.
#4 - Get pre-approved
Getting a pre-approval does not guarantee a bond but it gives you an idea of what you can afford based on your income, credit score, and your debt.
It also shows sellers that you are serious about buying and that you have already taken the steps to see what you can qualify for.
You need to get a few things in order before you can get pre-approved like your employment history, credit history, and other assets. Financial institutions can give you a better loan if your own finances are updated.
#5 - Consider homebuyer assistant programs
Many banks and other financial institutions offer payment programs that are tailored to meet the needs of a first-time buyer.
Some banks offer lower interest rates and others offer you a little bit extra on top of your home loan based on your qualification.
You can also approach banks and find out if they offer plans to help you manage and pay off your current student debt.
You don't have to wait forever until you buy property. There are options available that can help you find your dream home today!