First-time home buyers face a challenge when they try to break into the Southern Maryland housing market. Rents are going up, and the availability of low-priced homes remains limited. Couple that scarcity with several thousand dollars in student loan debt, and these buyers might feel that they’re not in a position to buy. Recent research reported that those who have completed a bachelor’s degree and want to buy a home are modestly affected by their student loan repayment.
Let’s take a look at some tips from financial experts for acquiring a mortgage while still paying down your student loan.
Your student loan repayment strategy
How you’re planning to pay of your student loan pays a role in determining whether you’ll be able to pay both the mortgage and your student loan at the same time. For example, the “snowball” method of servicing your loan gives you the chance to take a forbearance period. This period allows you to take a break from paying on your loan, though interest will continue to accrue. Taking this break lets you aggressively work on clearing other, smaller loans. Once the forbearance period is over, you will have taken care of those small those and you will be in a better position to take on a mortgage while still paying your student loans.
Another strategy is to ask your student loan administrator for a lower interest rate. This would reduce your monthly payments, freeing up some money for a low-interest mortgage.
Your financial plan for paying off the student loan
In order to pay off your student loan fast, you need a financial plan to help you cut expenses. Cutting expenses gives you more money each month to make bulk payments so you can clear the student loan in a short time. To have more money at the end of the month, consider using public transportation rather than riding a taxi, bringing in a roommate to split bills, or eating out less.
If you’re considering buying a Southern Maryland house and adding a new monthly bill, it’s important to work within your budget while you’re house shopping. Your financier will check your financial reports to determine your debt-to-income ratio and advise you on the amount you can afford to borrow for a home. Make sure your mortgage allows you to have affordable monthly payments so that you have some breathing room in your budget to address other needs.
Should you pay your student loan before taking a mortgage?
You can pay down your student loan and take on a mortgage at the same time, but it is a good idea to work on paying off your student loan as much as you can when you are fresh out of college. Focus on your student loans rather than moving into an expensive apartment or taking on a car loan. Paying off your student loan quickly means it won’t compete with other family-related bills when you get married and start having children.
Should your student loan prohibit you from buying a home?
Having a student loan shouldn’t prevent you from buying a Southern Maryland home. You can save for a down payment on the house while still repaying your student loans by changing how you spend. For example, you could save less for retirement, automate your savings contributions, and reduce large expenses. Proper planning can make buying a house while paying student loans easy.
What if you have substantial student loan debts?
One of the best ways to get rid of your student loan while building your savings is to live below your means. If you decide to upgrade your lifestyle, you risk losing flexibility in your budget.
Have a positive attitude toward repaying your student loan – don’t give up! Come up with a monthly budget to help you divide your resources so you know what is left at the end of each month. This helps you figure out whether you can increase your repayments.
Keep yourself moving forward by setting a repayment deadline so you can work toward clearing the loan before you reach the deadline.
Advice to those who want to buy homes but are limited by student loans
If you want to buy a home but feel limited by your student loan debt, there is a way to use that loan to your advantage: Make timely payments on the loan to help build a strong credit history. You can also improve your debt-to-income ratio by paying down your credit cards and other consumer debts. Work toward saving for a down payment and reducing your debts.
Having a student loan should not hold you back from buying a home. But, you should only take a path with which you feel comfortable. It is important to balance your student loan with your other financial goals. The home that you buy should allow you room in your budget to continue working toward other financial goals.
Buying a Southern Maryland home while still paying down student loans requires an ability to balance. Set your targets, and figure out what matters most to you. Decide whether you want to extend your student loan so you can save for a down payment – or, pay off the student loan before you start saving. Clear other debts, and don’t let having a student loan be a barrier to home ownership!
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