How to buy a home when you have student loan debt: Tips from The Fauquier Bank

If you went to college, there’s a good chance you’re among the more than 70 percent of graduates with student loans to repay.

While those loans allowed you to achieve educational goals, they could affect your ability to achieve another part of the American dream — buying a home.

But with careful planning and proper guidance, you can qualify for a mortgage.

To assess each specific situation, Victoria King of The Fauquier Bank recommends the first stop be with a mortgage loan officer. Understanding your financial profile — and how to improve it, if necessary — is the best place to start.

“When you want to buy a home, the first thing to do is talk to a loan officer, even before you talk to a real estate agent, so they can guide you in the home buying process,” she says.

Don’t worry; you’re not alone in this. About 45 million Americans have student debt. The average borrower owes almost $40,000, according to Student Loan Hero. Many owe even more, according to the National Association of Realtors. And it’s a particular problem for first-time homebuyers.

King recommends these steps:

Build Credit: Take small steps that can have a big pay-off. For instance, if you can’t get a major credit card, take out a smaller card, make purchases and pay them off in full. By practicing good habits, you’ll build your credit.

Improve Your Score: Once you’ve got a credit history, talk with a lender, who will begin by checking your credit score. The higher the score, the better the interest rate you can qualify for.

If you need to improve your credit score, there are several options, such as making payments on time, and keeping the balance below 50 percent of the credit limit. If your score still isn’t where it needs to be, King can help improve it through a “rapid rescore” process.

“I can absolutely help somebody with their credit score if they need it,” she explains. The process can take time, for both the lender and the customer, but it can be worth it. “It’s something I take the time to do in order to help my clients,” she says.

Reduce Monthly Payments: Keep your student loan payment — as well as all expenses — low in order to reduce the amount you have to pay each month.

“For qualifying purposes with a mortgage,” she says, “you want to get that payment down as low as possible.”

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 Buying a home is one of the biggest decisions you’ll make in life. We provide local expertise and personal service through our tradition of community banking with a hometown touch. Contact us for a free consultation to learn more about mortgage options from TFB.