Ready to buy a house in Redlands, but you’re worried about student loans? Many people put off buying a home because they are saddled with considerable student loan debt. In fact, close to half of college-educated Americans with student loans have postponed buying a home because of this debt. But it is in fact possible for people with student loans to buy a home if they do a few key things. Read on to find out how to buy a house in Redlands even if you have student loans.
Improve Debt-to-Income Ratio
If you have student loans, an important first step to buy a house in Redlands is to improve your debt-to-income ratio (DTI). Lowering this ratio can improve your chances of getting a mortgage loan. In fact, your debt-to-income ratio is one of the first things lenders will look at when evaluating your loan application.
Lenders place so much emphasis on DTI because it allows them to determine your cash flow and the likelihood of your handling mortgage payments while still staying current on your other existing debts including student loans Typically, lenders will want you to have a DTI of no higher than 28% on the front end and no higher 36% on the back end (which will include your mortgage payments and housing expenses).
Some of the things you can do to improve your DTI are;
- Paying down as much debt as possible
- Increasing your income
- Refinancing or consolidating student loans
- Lowering student loan payments with an income-driven repayment plan
Work on Credit Score
The next important thing to do to buy a house in Redlands even if you have student loans is work on improving your credit score. A lower score will make it easier to get a mortgage loan and at better rates.
Some steps to take here include:
- Making student loan payments on time
- Making sure to pay bills on time
- Decreasing your credit utilization (30% of the total credit score)
- Keeping paid-off accounts open (because the length of credit history also factors in)
- Avoiding new credit lines/debt
And one thing you should certainly do is to check your credit report for inaccuracies and errors. These are more common than you might think, and they can hurt your score. If you find any errors, report them to the credit bureau immediately.
Also, be sure to get pre-approved for a mortgage before you even begin home shopping. Pre-approval will let you know how much you can borrow, and you’ll be able to shop within your budget. The last thing you want when you have student debt is to buy a house in Redlands that is more than you can afford.
And there’s another plus to pre-approval. When you have your pre-approval letter in hand, sellers will perceive you as a serious buyer. This will give you more negotiating leverage to get a better deal.
Look Into Down Payment Assistance
Even after you do all these things, one major financial hurdle remains: the down payment. So you should also look into down payment assistance when you aim to buy a house in Redlands if you have student loans.
Making student loan payments makes it hard to save for a down payment, which can be as much as 20% of the purchase price. There are, however, a number of assistance programs that you can take advantage of, such as:
- A low-interest loan
- Down payment grants
- Second mortgages
- Matched savings programs
Hire a Qualified Local Agent
The last of our tips to help you buy a house may be the most important. And this is to be sure and hire an experienced local real estate agent. Your local agent will fully understand the local market and will know about where you can turn for down payment assistance and more accessible mortgage loans. We have the agents with the knowledge, expertise, and experience you need. If you’re ready to buy a house in Redlands, contact us at (951) 232-9704.