From USA Today
When Kristin and Sean Couch were ready to buy their first home, they feared that one thing would hold them back: Kristin’s student loans. Her broadcast journalism master’s degree from Syracuse University
had left her more than $80,000 in debt.
The Couches are part of a generation that’s delaying major life decisions, like whether to buy a home, because of student loan debt. More than half of student loan borrowers say their debt affects their ability or decision to become a homeowner, according to a 2015 survey of 1,934 student loan borrowers by American Student Assistance, a Boston-based nonprofit.
But becoming a homeowner is possible even if you have student loans. The Couches bought their 2,900-square-foot Craftsman home in Gainesville, Georgia, last spring.
Home shopping can be tempting. Three-car garages! Granite countertops! Stainless-steel appliances! Before you get carried away, research the type of home you actually can afford.
If you’re a first-time homebuyer, you may have to settle for a starter home instead of your dream abode.
But there are good reasons to buy a home sooner rather than later, namely tax incentives and the opportunity to build equity, says Brian Koss, executive vice president of Mortgage Network, a Massachusetts-based independent lender.
When lenders evaluate you for a mortgage, they typically look at four things:
• Your income.
• Your savings.
• Your credit score.
• Your monthly debt-to-income ratio.
Your debt-to-income ratio shows the lender your total financial obligations — including car payments, credit card debt and student loans — compared with your income. Lenders are looking for borrowers with a debt-to-income ratio of 36% or less, including the monthly mortgage payment. To keep yours low, pay off as much debt as possible before applying for a mortgage.
The Couches focused on paying off Sean’s truck and their credit cards, which they’d relied on when Kristin was “making less than peanuts” in her first few jobs. When they got their mortgage, their only remaining debt was from Kristin’s student loans.