I’m a Real Estate Professional: How I Work With Buyers With Student Loan Debt
If you’re saddled with student loan debt, you might fear that no matter how hard you work and how much you save, you’ll never be able to meet certain life goals — especially buying a house. Though you may dismiss your dream of taking the keys in hand as a financial impossibility due to your debt, there are still plenty of ways to get you in the front door (and potentially planting a garden in your own backyard).
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To better understand how buyers with student loan debt can still achieve their goal of home ownership, GOBankingRates talked to Matt Dunbar, senior vice president of the Southeast Region for Churchill Mortgage.
Do What You Can To Lower Your Loan Payments
The process of buying a home while also balancing student loan debt can require a delicate dance between savvy financial planning and practical decision-making. Dunbar said that the first hurdle in this process can involve “fine-tuning the debt-to-income (DTI) ratio, as hefty student loan balances can weigh healthy on this crucial metric, potentially limiting mortgage options.”
The DTI ratio is essentially a formula that lenders use to determine how risky of a prospect you might be. To swing the odds more in your favor, you can look for ways to lower your monthly student loan payments or even pursue loan forgiveness.
“Opting for income-driven repayment plans can be a lifeline — these adjust your monthly payments based on your income and often come with the promise of loan forgiveness down the line, providing both relief and a sense of hope,” Dunbar said.
He added that refinancing your student loans could be another option to reduce your financial burden every month. “By securing a lower interest rate or extending the repayment terms, you can lower your monthly payments, which may help improve your overall financial standing,” he said.
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Look For Loan Assistance Programs
While eyeing your student loan statement every month might make you feel hopeless, the good news is that you might not have to go it all alone. Some employers offer student loan repayment assistance that can help mitigate your monthly payments.
If you’re considering advancing your education, but the idea of accruing debt that could lock you out of the housing market is scaring you away, you can also investigate tuition reimbursement through your employer.
“This kind of support not only helps in managing debt more effectively but also frees up a portion of your budget, making it easier to save for that down payment,” Dunbar said.
Using that extra income to pay down any credit card balances or other outstanding debt can help you get your credit in a good place, allowing you to look more attractive to mortgage lenders.
“Keeping a healthy credit score is equally vital, as it influences the mortgage rates and terms you can secure,” Dunbar said. “This means being diligent about keeping up with debt payments and managing your credit card balances carefully.”
Open the Door to Programs For Home Buyers
Dunbar shared that people who are entering the housing market for the first time should consider down payment assistance programs to help take some of the financial burden off their shoulders.
“These programs often offer perks like reduced down payment requirements or grants, making the dream of homeownership more tangible,” he said.
If you’re in a profession that tends to tack on higher loads of student debt, like medicine or law, he said that you might look out for specialized mortgage programs that are tailored to your situation. These programs can offer more agreeable or lenient terms or even outright ignore your student loan debt when calculating your DTI.
Show Consistency With Your Finances
As you muscle through your student loan debt, you might be tempted to take on side gigs or even a part-time job that can help you pay it down faster while saving more for a down payment on a new house.
While your industriousness is commendable, Dunbar said that providing lenders with evidence that these additional revenue streams will keep on flowing is important.
“Demonstrating a consistent history and future assurance of this income is crucial during the mortgage application process,” he said.
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This article originally appeared on GOBankingRates.com: I’m a Real Estate Professional: How I Work With Buyers With Student Loan Debt
