7 Ways To Afford A House While Paying Off Student Loans

1. Save up for a larger down payment

Putting a larger down payment will save you thousands of dollars in the long run.

Most lenders look for at least 20%. With a 20% down payment, you might avoid having to pay mortgage insurance and you could qualify for a better rate.

In fact, 18% of homebuyers regret not putting a bigger down payment (according to a survey from Tulia). And it ranks #4 in reasons borrowers get denied a mortgage (Nerdwallet survey). So when you consider these factors, putting a bigger down payment is good decision regardless of student debt.

2. Pay off other debts

If you can pay down credit cards or other debts, this gives you two advantages:

1. You build credit. Your credit score is the most important factor to getting approved for a mortgage. It’s the first thing lenders look at to see if you qualify. First impressions are everything to lenders. If you have bad credit, you could still get a loan if your income is good and debts are low. However, it’s tough to get a lender to look in your direction with a low credit score. Eliminating debt boosts your credit score.

2. You get better rates. Paying off debt improves your debt-to-income ratio (DTI). If you want the best rates, lenders use the 28/36 rule. This means your mortgage payments shouldn’t be more than 28% of your gross monthly income. And your total monthly expenses shouldn’t be more than 36% of your gross monthly income. Total monthly expenses are your mortgage payments combined with car payments, credit card payments, student loan payments, and any other monthly payments. The lower your monthly expenses are, the better rates you could qualify for.

Note: Don’t close credit accounts after you’ve paid them off. Old accounts show longer credit history. This gives you a better credit score.

3. Boost your income

You might be thinking, “easier said than done”.

But actually, it might not be as hard as it seems.

The reason is because of the internet. It’s a thousand times easier to find a part-time job that pays better. You don’t have to run around looking for a job like people did up until 5 to 10 years ago. The fact is, everything is moving online. You got dog sitters, house cleaners and car mechanics to managers, salespeople and engineers – and everything in between.

You have an upper hand: your education. That makes you even more qualified to go online and get paid for your services. Check out sites like Glassdoor, ZipRecruiter and Great Place To Work where you can read company reviews, name your salary, and even search for companies that will reimburse your tuition.

4. Refinance student loans

One loan to rule them all.

When you refinance, you’re replacing all your student loans with a new loan. There are three benefits of refinancing:

1. Lower interest rate. You don’t have much say over the interest rate of your student loans. When you refinance you can get a lower interest rate. That way you’ll save thousands on interest.
2. Simplified payments. If you have multiple student loans, you’re making several payment each month to different lenders. When you refinance you’ll have only lender. That way all your payments will be combined into one and you won’t have to keep track of multiple loan payments every month.
3. Choose a new repayment term. You can choose a shorter term if you can handle higher monthly payments. With this option, you’ll pay off your student loans faster. Another option is you can choose a longer term and have lower monthly payments. This option would make it easier to qualify for a mortgage because you’d have lower monthly expenses (the 28/36 rule).

5. Accept gifts

Gift donations can go toward your down payment.

6. Use a down payment assistance program

There are plenty.

• FHA. FHA offers a 3.5% down payment assistance program.
• FHA 203(k). This program makes it easier to buy a fixer-upper. Cost of renovations are included into the mortgage. The down payment can be as low as 3%.
• VA. These loans help active-duty military members, veterans, and their spouses buy homes. VA loans offer competitive interest rates, $0 down payment, paying mortgage insurance is not required, and there’s no minimum credit score needed for eligibility.
• EEM. Energy efficient mortgages lets you upgrade your new home to become energy efficient without spending a fortune. Like FHA 203(k), the cost of energy efficient upgrades are included into your mortgage. That way you could qualify for a bigger loan than you would otherwise.
• USDA. USDA loans are not mentioned very often. They offer assistant programs for homes in rural areas.

There are many more programs that help homebuyers afford a new home. Before you buy a home, make sure to scout for all the grants and programs available to you.

The easiest way to do that is to get pre-approved.

7. Get pre-approved to know where you stand

This will give you a major advantage in two ways.

1. You’ll know exactly how much house you can afford. A common mistake homebuyers fall into is they go house hunting before they know their price range. It’s easy to spend weeks and even months searching for the perfect home. If you’re searching in the wrong price range, it’s disappointing (to say the least). You’ll have to start the search over from the beginning, which can take several more weeks or months.

2. You’ll become a formidable bidder. Having a pre-approval letter gives you an edge over other interested buyers. Sellers take pre-approved buyers more seriously because they’re further along in the process. With a pre-approval letter you’re likely to win the bid and own a home a lot sooner.

There are many other ways to afford a house while paying student loans. The best way to find out about all your options is to get pre-approved.

Don’t get stuck paying too much for your mortgage. Get pre-approved now and find out what options are available to you.

P.S.

When you close a loan with First Fidelity Mortgage, you’ll have a chance to win FREE mortgage payments for a full year. Chances of winning are 1 in only 150!

Get pre-approved now and enter your chance to win FREE Mortgage Payments For A Full Year. Next drawing is coming up on January 2019.

P.P.S. Congratulations to the Edwards family for winning Free Mortgage Payments for a Year!!!

About the author

Stephanie Vigil

Home life enthusiast, writer and #lovingallthingskentucky.