The end of Mayis coming fast, which means that graduation season is right around the corner! As many college grads are looking forward to throwing up their caps and starting their new jobs, there is a large elephant looming over their heads: student loans. Yes, student debt can be intimidating, but despite this, you can still buy a home. Keep on reading to see how you can do it!
Decrease Debt-to-Income (DTI) Ratio
While student loans represents a debt that you may have, it can easily be offset with the amount of income that you have. Creditors make their decisions to grant a mortgage based on a variety of factors, yet DTI ranks among the highest, as it shows both your financial stability and the amount of money you can spend per month to make a payment. As a general rule, you should spend under 28% of your monthly income for housing expenses, and under 36% on all of your debt. So, try your best while you are house hunting to keep those numbers in check.
Remember the Down Payment
Although you are busy at work keeping your DTI in check, remember that you will also be responsible for a down payment at the time of signing. Depending on your current credit, your down payment could be as high as 7%, but don’t fret, as there are several programs out there that may allow you to take a lower down payment. For example, the Federal Housing Administration (FHA) offers loans that, if you qualify, could result in a down payment of under 3.5%. On the other hand, if you served in the military, the Department of Veterans Affairs offers loans with no down payment. Some credit unions may offer loans at a smaller percentage as well. Our best advice to you is save as much as you can for a down payment, and then start to shop for a loan that will work for you.
The Golden Rule: Buy What You Can Afford
It’s a simple point, but an extremely important one: only buy what you can pay for. Keep in mind not only your current obligations for your student loans, but also the costs that come with home ownership, such as maintenance. Home ownership can be exciting, but it comes with a hefty financial responsibility, so have that in the back of your mind as you begin to look at houses.
Buying a home and having student loans do not have to be mutually exclusive—both can be managed if you are financial responsible and look at the right homes. When you are ready to begin your next chapter, be sure to choose an agency that has experience, and one that you can trust. Be sure to turn to American Dream Realty of South Jersey!