If you left college with a boatload of debt, you may feel like you are stuck renting for the rest of your life. Luckily, that doesn’t have to be the case. Student loans do add debt to your monthly load, but they don’t have to be the reason you don’t get a loan.
Keep reading to learn how you can make your student loans work for you.
If you want to find the good in student loans, they can help you build credit at a time when you may otherwise not have much. The moment you start making payments on your student loans (after the deferment period), you start building credit.
If you make on-time payments, you build good credit. You show future creditors that you are able to take on debt and make your payments on time. As you pay your balance down, you build a credit history. If you don’t have many other trade lines, especially a housing trade line, the student loans can help lenders form a favorable opinion of your financial habits.
Keeps you Accountable
Sometimes having student loans can help you stay cognizant of what you can truly afford. It is easy to get in over your head with a mortgage. You see the maximum amount you can borrow and you take it. The reality doesn’t hit until you have to start making those large payments.
If you have student loans, you have to be aware of the bills you have already. You then have to see how a mortgage will fit in with what you already have to pay. While it may limit how much you can afford, slightly, it will keep you aware of the other bills in your life. You won’t just have a mortgage once you own a home as many more expenses and bills will come up. Having those student loans in place help you stay aware of what you need to do in order to avoid overwhelming yourself.
Makes You Creative
Depending on the amount of your student loans, you may find it hard to secure a down payment. If you are paying out all of the money you make, you may only have a small down payment. This is what makes many people assume they can’t get a mortgage, but it’s not the case. It’s time to get creative.
Start with government loans, such as the FHA loan. You only need a 580 credit score and a 3.5% down payment. That’s not a lot. If you buy a $150,000 home, you need only $5,250 down. If you don’t have that much, it’s okay. If you have someone willing to give you a gift for the down payment, you can accept it. The FHA doesn’t require you to put any of your own money down as long as you have a 580 credit score.
If the FHA loan isn’t right for you, check out the USDA loan that doesn’t require a down payment. If you are a veteran, check out the VA loan, another option that doesn’t require a down payment. The point is that you need to think outside the box – there are options, you just have to use them.
Of course, there may come a time that you do just have to wait to get a mortgage because of your student loans. If you are in over your head, you may want to consider refinancing the loans or asking for assistance. Some federal programs have programs that either defer the payments or prorate them based on your income.
If you find that you don’t qualify for a mortgage quite yet, take your time. Keep paying your bills on time and building that credit score. Save as much money as you can and eventually, the mortgage approval will come. It may not be right out of college when your student loans are fresh and huge, but it will come as long as you put in the work to stay diligent.