(MotivateDaily.com) – Your student loan has helped you get through all of those long years of college. The payoff is big; you’ve achieved your dreams and landed the perfect career. But there’s a problem — you’re also stuck with grueling student loan debt, and that doesn’t leave you a lot of room for big purchases, like a new home.
Is it really possible, or smart, to make the sale when you’re in so much debt? The answer isn’t as straightforward as you might think.
Know Your Creditworthiness
This is very important. Before looking at homes, you need to know what your credit or FICO score is along with your debt-to-income ratio (DTI). Your DTI is simply all of your debt payments divided by your monthly income. If this percentage is too high, it will reflect in your credit score. Both making achieving home ownership difficult.
A good qualifying DTI is around 35%, but lower is better. Having a FICO of 740 or higher is also solid. Each lender is different with their mortgage criteria — keep that in mind.
Start Saving Now
If you want to obtain a home loan fresh out of college, there is no time like the present to build up your savings. Get on a budget that will allow you to put money aside for a down payment. Many first time mortgage programs do offer 0 to 5% down. But if you don’t qualify, you should consider a conventional loan with about a 20% down payment.
Pay Down Debt
The best thing to do right now is chisel away at your existing student loan debt. This also includes any related credit card debt. Try either the debt avalanche or snowball method to bring those values down.
Start off small and pay off your debt one account at a time. Or, go big and tackle large balances and high interest loans first. Either way, it will benefit you before and after home ownership.
Don’t Fall Prey to Scammers
There are scammers around every corner ready to prey on people desperate to get out of debt. If you were turned down by a lender, they will offer to finance you, but at unbearable interest rates and hidden fees. Please don’t fall for this! The scammer will get away with your money and you’ll just be further in debt.
Even if you have a lot of student loan debt to deal with, you shouldn’t fret. There are ways to get it paid down and obtain an affordable and reasonable mortgage at the same time. By being smart about spending and saving, it won’t be long until you get the keys to the home you’ve always dreamed of.
~Here’s to Your Success!
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