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Don't Let Student Loans Keep You From Owning a Home

Buying a home does not have to come second to paying off student loans. Most borrowers owe an average of $30,000 in debt. If you waited to pay off your loans first, you might be waiting 10 years or more. 

Whether you can afford a home now depends on more than your student loan debt. Here’s how you can put yourself in the best position for home ownership too.

Know What You Can Afford
If you’re ready to apply, get pre-qualified. You’ll not only know what you can afford, but you’ll also know what you need to work on. You may find you’re in a good position to buy now, or you may want to improve your finances first. Most pre-qualification letters are good for 60 – 90 days so you have time to make the right decision.  

Maintain a Good Credit Score
You might not be able to pay off your student loans anytime soon, but you can greatly improve your credit score along the way. Your credit score is a combination of several factors and is completely within your control. Your credit score is what will determine your interest rate. The lower the rate, the lower the payment.  

Pay Your Credit Card Twice Per Month
Your credit card debt is an important factor in the approval process. If your debt to credit limit is too high, or your credit utilization ratio is over 30% (monthly credit spending), it might hinder your approval. If you want to tackle the debt as quickly as possible, make multiple payments per month instead of one. Why? You’re far less likely to spend the extra money on something else if you immediately apply it to your debt. Also, your credit card company reports your balance to the credit bureau once a month. With multiple payments, you may be able to squeeze in another payment or two before reporting.  

Consolidate Credit Card Debt 
If your credit card debt is keeping you from being pre-qualified, consider consolidating your debt. Just be sure you know and understand the fees associated, and what your interest rate will be if you take advantage of low to no interest rate offers on balance transfers. This can be a great way to make sure the bulk of your payment is doing the greatest good to lower your balance. 

Be Prepared with Cash On-Hand
Mortgage loans can require anywhere from 3 to 20 percent down depending on the loan type. Even if you’re not ready to get pre-approved, talk to a loan officer with your financial institution, or even better – your credit union, and know which loans require what so you can be prepared financially when the time comes. You’ll also want to be prepared for closing costs and other pre-paid items. This is separate from your down payment. Check with your financial institution to see if they pay a portion of the closing costs or what programs may be available to you for assistance.

Source: Forbes