If you are like many of us, you have student loan debt that piled up over the course of your education. This made it easier to find the kind of job you wanted once you graduated, but now that you are thinking about buying a home, it has made things more difficult.
You are locked into monthly payments for the student loan debt which can increase your debt-to-income ratio which lenders use to determine how much money they are willing to lend you on a home purchase. This can mean that you qualify for a smaller loan, or you may not qualify at all.
Student loan debt can also affect your credit score which can affect the mortgage interest rate that you qualify for, making it even harder for you to get the home you want. A higher interest rate can dramatically affect the monthly payment on a home. For instance, if you have the same $200,000 home at 3% interest and 5% interest, your payment can change by over $230 per month.
Finally, having student loan debt can make it much harder to save up for a down payment on that first home. Lenders traditionally want you to have 20% of the purchase price. There are many programs where you can have a smaller down payment, but they can be tricky to qualify for, and most still want you to have at least 5% down. On a $200,000 home, that is $10,000 cash up front.
What we are seeing right now, with the competitive real estate market, is many people sitting on the sidelines. This has created opportunity for investment firms who are buying up residential real estate and turning it into rental properties. They have deep pockets and can pay all cash for properties, edging out many individual buyers. Being a renter can have advantages, especially if there are pricey repairs that don’t have to be paid by you, but the American dream is to have your own home with no-one to answer to except maybe a lender.
If you want to see if buying a first home in the Lake Wylie area is right for you, give us a call at 803-831-8588 and we can put together a plan for you and your family. You can view current listings and create custom searches on our website here.