Student loans are becoming an increasingly normal debt in today’s society. The rising cost of tuition and other college fees leaves many with no choice but to take out many of the costs of school on loans that often follow well into adulthood. Once a student graduates and secures a job, often the next step is to buy a house. In today’s housing market, there are many potential problems facing house hunters who also carry student loan debt. While sometimes difficult, it is not impossible to secure a mortgage and purchase a house.
Those who have student loans should consider paying extra on the principle; doubling up on payments is even better. This is wise for a couple different reasons. First, with the crash of the housing market in 2008, the lending standards are much stricter. Those who have large student loans but a short work history may be denied due to an income versus debt ratio. Some student loan debt is permissible; however, anyone carrying large amounts should consider paying it down some before house hunting. Like any debt, such as credit cards, ideally it should be minimal before taking on a mortgage.
Once a house is purchased, there is always something to be done that will cost money. Renovations need doing, something needs to be fixed, or something else comes up. With both student loan and mortgage payments, many people find that extra payment incredibly stressful. Reducing or eliminating student loan payments will free up more cash for the unexpected. This helps reduce stress and well as save extra money.
While student loan interest rates are traditionally pretty low, it still costs a bit of money out of pocket that does not need to be spent. If looking for a mortgage, consider contacting the student loan lender to see if lower interest rates are available. Many times lenders offer promotional rates to the borrowers that consistently pay their bill on time. Depending on the monetary amount of the student loan debt even a percent of two can add up to a significant savings.
When a mortgage is secure, if there is a lot of student debt remaining, consider purchasing a slightly less expensive house. Is there a fixer-upper that could save some cash on a mortgage? For those who are single without a family, consider a one or two bedroom house. Would a smaller house be enough to fit your lifestyle needs? Statistics say that someone who buys a house needs to own it for three to five years in order to profit from owning it. Many life circumstances can change in five years. A starter home, a smaller or less expensive house, may be a great way to save money by owning a house and still chip away at the student loan debt.
There are many ideas and ways to save money during the time of house hunting. A student loan is treated as equal debt as opposed to other debts such as credit cards. Make sure the income to debt ratio is in proportion and your credit score is high to secure a mortgage while still holding student loans.