For those just finishing college, no matter on the age, student loan debt can affect your ability to buy a home. College is a great opportunity to establish yourself in a professional setting while gaining several connections in your industry. However, it's also a time when student loan debt racks up and doesn't become a burden until you've finished.
Once you've earned your degree, you're likely looking for an ideal job to kick-start your new career. While you might have found the perfect job, student loan debt could be holding you back from your future home, Sarah Billings, a recent grad, explained to Zillow in an interview. She said that she currently owes $60,000 in student loan debt for her degree in social work.
"It's striking in some way that here I am trying to end homelessness and help people who are marginalized by our system, but in order to do this work I love doing, I've got to live paycheck-to-paycheck and not be able to invest in and strengthen my own financial future," said Billings, according to the source.
Getting qualified for a home loan with student debt
There are many obstacles that can prevent you from earning a qualified home loan, and each student loan debt you own shows up on a credit report, Credit.com News reported.
While paying off a student loan entirely is the most beneficial way to get approved for a home loan, it's often impossible to do for years. Consolidating student loan debt into one monthly payment could improve your chances to qualify for a home loan, the source reported.
Can recent grads afford housing?
A report from RealtyTrac researched the minimum income and housing costs need for consumers for afford a home with and without student loans in 494 counties in the U.S. However, the report found that 96 percent of the housing markets are still in reach and affordable for recent graduates with average student loan debt.
Personal finance management simply has to be a priority for recent grads, especially if they see themselves owning a home in the near future. The researchers found only high-median areas in states like California and New York were too pricey for those with student loan debt, but these areas are hotbeds for new homeowners.
Despite widespread affordability, Daren Blomquist, vice president of RealtyTrac, explained that some people are still prevented from getting a home loan because of their student loan debts, the report stated.
"However, student loans still represent a significant handicap for recent graduates in terms of the minimum income needed to buy a median priced home," said Blomquist, according to the report. "Nationwide, recent graduates with student loans need to earn 34 percent more ($8,969) than recent graduates without student loans to be able to afford a median-priced home."
No matter your status with your student loans, it could help to talk to one of our financial experts about the next steps for planning to buy a home.
For more information about smart ways to manage your finances, contact Landmark Bank.
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