Student Debt And Buying A Home
Posted by Richard on January 7, 2021
With interest rates currently so low, right now could be a good time to buy a home. But if a person has student loans, it is pretty hard to save 20 percent for a down payment. What can a person do?
If this is your situation, you are not alone in finding student loan debt a barrier to becoming a home buyer.
The National Association of Realtors found that 47 percent of people who wanted to buy a home said student loan debt was getting in the way of saving for a down payment.
About 43 percent cited cost of rent as a reason and 36 percent said credit card debt was an obstacle.
However, recent data from the Census Bureau suggests home ownership rates are high and rising. This means that student loan debt has not completely prevented borrowers from purchasing home.
Still, if student loan debt is a factor for you, then you still have options.
One is that you might wait for the new administration to act. Chances are that some portion of student loan debt will be forgiven. Some observers think the administration will write off $50,000 per student. Others think the number could be much lower.
Suppose, however, there is no write-off.
An FHA loan requires just a 3.5 percent down payment and a minimum credit score of 580.
The key is making sure you have an acceptable Debt To Income ratio. Even if your loans are high, you could qualify for an FHA home mortgage with stable income, good work history and acceptable credit score. This assumes you want to buy a home you can afford.
You might also get some flexibility by refinancing your student loans.
In short, you can qualify for a mortgage by remaining mostly debt free except for student loans.