Exploring Options for Home Buying While Carrying Student Loan Debt
Student loan debt impacts the lives of millions of Americans, many of whom want to be homeowners.
Take a look at the numbers as of 2018:
- 77% of college seniors who graduated in 2018 had student loan debt
- the amount of student loan debt carried by the graduates averaged to $37,172 per student
- the total amount of debt carried by Americans totals more than $1.5 trillion.
More and more potential home buyers are entering the market under mountains of debt. Many of them have ruled out buying a home because of the monthly student loan burden. However, it is possible to become a homeowner while paying off student loan debt. You don’t have to choose whether to pay off student loans or buy a house. With the help of first-time home buyer programs, you may be able to do both at the same time
Know What You Can Afford with Student Loan Debt
For many student loan borrowers, the biggest hurdle to homebuying is coming up with a down payment. Most states, including Louisiana, offer first-time home buyer programs that will subsidize the down payment. Also, many lenders also offer mortgages that require far less than the traditional down payment of 20% of the home’s price.
Exploring these options makes first time home buying affordable, however it’s important to go into the process knowing what you can afford to spend every month. In the months leading up to buying a home, calculate what you can pay on a monthly basis. Set aside this payment and see how it fits into your budget. If you are comfortable putting this “payment” into savings every month, you’ve established your budget.
The national FHA loans are a great option for many first-time home buyers still establishing their credit. The Federal Housing Administration does not require 20% or even 10% down. Sometimes a down payment of only 3.5% is required as long as you have a credit score of 580 or higher. Mortgage insurance is required for the life of an FHA loan and cannot be canceled.
The U.S. Department of Veterans Affairs helps service members, veterans and surviving spouses buy homes. VA loans offer competitive interest rates, along with no down payment or mortgage insurance.
A USDA home loan is especially helpful in rural communities. This is a zero-down-payment mortgage for rural and suburban home buyers. USDA loans are issued by the U.S. Department of Agriculture through the USDA Rural Development Guaranteed Housing Loan Program. However, there are income limitations, that vary by region.
The Louisiana Housing Corporation has programs for first time home buyers, however, there are income limits, as well as maximum purchase prices. Here are a few general guidelines to keep in mind. Reduced mortgage insurance programs are available and a 30-year fixed-interest loans are at or below market rates. However, a home buyer education course is required along with a credit score of 640.
Here are a few programs available through the LHC:
- LHC Preferred Conventional Program:This program offers a conventional mortgage that allows for a higher loan value than FHA. It also allows for higher income limits and no upfront mortgage insurance premium.
- LHC Choice Conventional Program: This program provides additional closing cost assistance to borrowers that meet specific income limits.
- LHC Advantage Program: This can help homebuyers lower their mortgage insurance and interest rate resulting in a reduced monthly mortgage payment.
- Delta 100 Program:This parish-specific program is available to some low to moderate income, first-time homebuyers in the Delta parishes who may lack traditional credit.
- Mortgage Credit Certificate Program:This program is available to first-time homebuyers, veterans and buyers purchasing a home in designated areas who are low to moderate income.
- Down Payment Assistance Programs:The LHC offers several programs that can assist eligible homebuyers reduce their down payments.
Carrying student loan debt will not kill your dreams of owning a home. Staying within your means and educating yourself on the fist-time buying programs available can help you on your journey. Preferred Lending Solutions can help you explore your options during the loan application process. Contact us to get started!