The cost of college has increased over the past decades. Studies show that most 2017 college graduates have over $38,000 in student loans. Yes, this can feel like quite a burden. Especially when you are just starting out in life and your career. Fortunately you also can qualify for a mortgage to own that first home you’ve dreamed of.
Lots of college graduates now are feeling quite frustrated with how student debt has given them a really tough start to their career. But you don’t need to let it limit you. In some ways, by having student loan debt you have likely learned a lot more about being serious with money than other recent college graduates from previous generations. So your money management skills long term will be much stronger and stable as your income rises.
Here are some things to do, as you start to consider if it’s time to get a mortgage. This is whether you are getting your own place, or with friends or even with a partner/husband/wife:
Sometimes you’ve had a parent or family member help you with your student loans. You’ll need to start by getting records of which payments you have made and the ones they also have made.
Understand how many student loan payments are due. Know exactly what your payments are. Do you know what the total amount is that you owe your college or university?
Under some circumstances, there are loan forgiveness programs. If you get a job with the government that is in high demand or into a program that offers this, typically they will let you know upfront that this is available. Some programs may forgive part of your student loan and others may take care of it all, it depends on the individual circumstances and the company or agency. But if student loans are a serious concern, we recommend you make the effort to look into this option as it can be helpful.
Be realistic about the mortgage that you can take on while paying student debt. Most personal finance experts recommend considering that your mortgage be approximately 35% of your monthly budget. If you’ve gone through undergraduate school and then straight to graduate school, your student debt totals may be quite high. So for now, the mortgage percentage in your budget could be a bit lower. But because of your education, in the long-term your earning potential is likely quite promising. So the mortgage that you get today may be quite different than the one you get 3 or even 5 years from now!
Know how your credit score works. Some college students and recent grads are quite savvy about a lot of things, including quantum physics, but they don’t realize how their credit score works in relation to their ability to get a mortgage. To put it simply: this score lets a creditor determine if you are a good candidate to lend money. A score to aim for is 700, which is considered a good score. One thing you’ll especially want to do is to pay all of your bills on time. It can be quite easy to misplace a bill or to get busy, but when you miss payments this is reported to your credit agency. This in turn, affects one’s credit history and credit score, both are things which a creditor will look at.
Think now about putting equity into your home. This is something that most homeowners do as they are preparing to sell. If you start thinking with the end result in mind, then you will constantly be protecting your investment. Over time, if you add several or quite a few improvements then you can feel confident that when it’s time to sell you’ll get a higher price for your home. That’s something every homeowner wants to do. Caring for your home all the time is a lot simpler than rushing around and doing a few “quickie” projects with the hopes of raising the price when you put it on the market. Remember that this is your first home, it will always be special to you. You can earn from its sale and get an even grander home the next time you get a mortgage!