Did you recently graduate from college or university? If so, you may still be dealing with a financial hangover in the form of student loan debt. The vast majority of today's students have to borrow to invest in their education, which can affect financial plans once school is finished. In today's post, we will explore buying a home with a mortgage when still dealing with outstanding student loan debt.
Your Situation Is Common, But Unique To You
First, try to keep in mind that you are not alone. Many former students are moving on with life, working hard to build a career and a life while juggling past student loans. However, your situation is unique, and thus, you need to plan it that way. For example, are you single or married? Are you in a stable career or are you potentially shifting jobs? Do you have children or are you planning to soon? Your financial needs are unique and need to be prepared and budgeted accordingly.
Understand Your DTI Ratio
Have you heard of the debt-to-income or 'DTI' ratio? When you take out a mortgage to buy a home, this ratio is one factor in determining how much you can borrow. It is a ratio of your monthly debt payments versus your monthly income. As you are paying off student loan debt, that will increase your DTI ratio. Adding a mortgage, car or other monthly payments on here will as well. You will want to ensure that you maintain a healthy debt-to-income ratio or it can be challenging to stay solvent.
Balancing Your Mortgage With Your Other Loans
You may have heard this saying: "life happens." It is rare that anyone can spend years with everything going according to plan. If you run into a temporary health or job-related issue, you may need to do some juggling to keep your mortgage and other payments fully managed. For this reason, it is worth trying to save at least a few months of your monthly expenses in a 'rainy day' fund. Just in case of an emergency.
Balancing a monthly mortgage payment with student loan repayment can be challenging, but it's possible. If you would like to learn more about mortgage products that are perfect for recent graduates, contact us today. Our professional team is happy to share how we have helped others with student loans realize their dream of homeownership.