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Even with Existing Student Debt you can still Purchase Your First Home

Published: 07/07/2017

Published in: debt, first-time home buyer

As reported in the American Bankers Association Banking Journal, a quarter of prospective first-time homebuyers said they expect to purchase a home in the next two years, according to Bank of America’s second Homebuyer Insights Report released on April 18, 2017.

To prepare for the purchase, 61 percent say they are paying off their current debt, 47 percent are working to improve their credit score and 45 percent are saving money to put toward their home purchase. 

All good ideas, but for most millennials student loan debt is a real issue, actually a big issue for some. According to a Nielson’s report, millennials are twice as likely as the average consumer to have student loan debt and roughly 26% use their extra money to pay off these debts.

So the question needs to be asked; Can you still purchase your first home even with Student Debt?  We caught up with Jill Hamilton, Senior Vice President, Director of Retail at State Bank Financial to ask a few questions and get a few answers.

Q1: What is the best way to get started, if I have a student loan and I want buy a house?

I would recommend that anyone who is interested in purchasing a home in the next 1-2 years sit down with a qualified mortgage originator and review your financial situation and come up with a plan.  Many young individuals have not established a credit history.  Banks offer tools for individuals to establish credit and offer advice on how to improve your credit score.  At State Bank Financial we offer a Certificate of Deposit loan that will allow you to build your credit history.  We take time to create a plan and work with you every step of the way.

Q2: If I have a student loan how does it affect my ability to get pre-qualified? Or does it?

Student loan debt does factor into the calculation of your debt to income ratio.  My best advice would be to have a conversation with an experienced mortgage originator to determine how the student loan payment will figure into this calculation. 

Q3: I have a Student Loan, but what are five steps, in your opinion, to home ownership?

I would tell you to:

  1. Review your credit score and history for your previous credit performance.
  2. Keep your debt low and pay your bills on time. If you have student loans treat them like any other debt and pay them on time.
  3. Set a budget and avoid impulse buying on major purchases. Put funds aside for a down payment.
  4. Buy a home you can afford. Talk to a mortgage originator to determine a loan payment that fits into your budget.
  5. Get preapproved for a mortgage loan with us, or your current financial institution.

 Jill’s Fast Five. Five Steps to Buying a Home even with Student Loan Debt:

  1. Good Credit Score
  2. Keep your debt low (Debt to Income)
  3. Set a budget
  4. Buy a home you can afford
  5. Loan preapproval

The survey also noted a number of millennials, 18 – 34 year olds, understand the value of homeownership.  

In fact some stats include:

  • 79% of millennial homeowners believe buying a home would have a positive impact on their long-term financial life.
  • 86% view owning a home as a more affordable option than renting.
  • 68% said they view their current home as a stepping stone toward the home they want to end up in.
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