There’s much buzz about how young people are graduating with so much student loan debt that they are foregoing rites of passage like moving out and buying cars. But some are marching forward with mortgages.
“A recent report shows that 27 percent of all home buyers have student loan debt and a whopping 40 percent of first-time buyers have student loans,” says Warren Goldberg, president of Mortgage Wealth Advisors in Plainview.
What’s their secret for juggling student loan debt and a mortgage?
Choose the right lender: For buyers with student loans, an FHA loan can be a great option. “Fannie Mae and Freddie Mac made favorable changes to how student loan debt factors into the mortgage qualification,” Goldberg says
Quontic Bank has an affordable housing program called the First Home Club. Before purchasing a home, qualifying first-time home buyers make monthly deposits into their Quontic Bank savings account. “For every $1 saved and deposited, they receive $4 in matching funds, up to $7,500, towards the down payment and closing costs,” says Kimberly Sheppard-Hope, a Quontic senior loan officer in Melville.
Other banks and organizations also offer programs to help first-time buyers.
Refinance student loans: You can lower your student loan payments through refinancing. “You can also pay off your student loans faster and lower your debt-to-income ratio, which can make you more attractive to mortgage lenders. You may secure a lower mortgage rate,” says Zack Friedman, founder of Makelemonade.co, a personal finance comparison website.
Work on your credit: A great credit score can mean a great mortgage rate — and less money paid monthly and over the life of the loan. Says Goldberg, “Boost your score by paying down your debt and avoiding late payments.”