Could My Student Loan Repayment Plan Stop Me From Buying My First Home?
American’s are no strangers to the concept of student loan debt. We were probably asked somewhere around the age of 16 or 17 what we wanted to do with our lives by a parent, teacher, or guidance counselor. At that point, we picked a profession, and we picked a college or trade school that offered a continued education into that field. We gathered the necessary information of class lists and tuition, and then the uncomfortable conversation of how in the world this new education is going to be financed.
There are a ton of resources for investigating federal government loans and private loans to finance education. However, most of those resources are not going to touch on how it looks when the repayment period begins. A new report from the Student Loan Hero website paints a haunting picture with statistics stating, “Americans owe over $1.56 trillion in student loan debt, spread out among about 45 million borrowers. That’s about $521 billion more than the total U.S. credit card debt.”
“Among the Class of 2018, 69% of college students took out student loans, and they graduated with an average debt of $29,800, including both private and federal debt. Meanwhile, 14% of their parents took out an average of $35,600 in federal Parent PLUS loans.”
Many student loan servicers offer a myriad of payment plans. However, when you are buying a home it is important to know how your repayment plan will affect your approval odds. You will want to take note of how your plan is structured especially if you are a first-time homebuyer!
First-time homebuyer programs can be a great way to get into your first home. They allow for cheaper down payments and help from the seller to help cover closing costs, If you’ve taken the time and discipline to save up the money for your first home purchase, then you want to make sure that you are spending your money wisely. Why not take the extra step to figure out how your debts affect your loan as well?
Student loans are treated differently in accordance with the regulations placed on each individual home buying program. In some situations, the payments that report on the credit report are treated just as they appear. In other situations, they might be ignored altogether, and you might be counted for 1% of the total balance due on a monthly basis. Those numbers can be drastically different especially if you are on an income-based repayment or a deferment plan. That is why it is so important to know how your repayment plan is structured.
With student loan debt on the rise in the United States, know that you are not the only first-time homebuyer in this situation. Have your numbers ready, and talk to your loan advisor about the best way to get your loan approved for your purchase. This way you are not caught off-guard when the question arises, and you are equipped to make an educated financial decision.