Tuesday, July 12, 2016

Should I Buy a Home When I Have Student Loan Debt?

Becoming a homeowner is likely the largest financial investment you'll ever make. As someone fresh out of college who is working on paying off those student loans, the dream of owning a home at the Lake of the Ozarks can seem like just that, an unreachable dream. How are you going to save enough money for a downpayment? Or do you not have to? Keep reading to learn if purchasing a home while you're paying on student loans is an option for you.

Homeownership


Many factors should be taken into account when choosing to purchase a home. While renting does not allow you to build equity in your own home, you may question whether adding more debt in the form of a mortgage is the best idea for your budget. Does becoming a homeowner at this point make sense?

Examining Debt


Not all debts are the same. With student loans, your asset is your education, which no one can take away from you. However, if you have mortgage debt and can't afford your payments, your home can be taken away. In addition to your credit score, your mortgage lender at the Lake of the Ozarks will look at your debt-to-income ratio. Depending on how much student loan debt you have, that ratio may be too high to purchase a home at this point in your life anyway. In order for a mortgage to be backed by the government, this ratio can't exceed 43% of your income.

Renting vs. Buying


With all-time low mortgage rates and rising rent costs, homeownership may seem like the best option. However, money isn't the only consideration you need to make. Are you planning to stay put in the same place for awhile, or are you unsure where you want to end up living? If you're planning to stick around the same area for at least two years, then buying might make sense. In this case, buying is more financially advantageous than renting in 70% of housing markets.

Downpayment Options


As someone with student debt, you may be struggling just to make your income match your expenses, let alone have any extra to save for a downpayment. While there are some low downpayment loan options available, the size of your downpayment will affect the total cost of your loan. The less you have to borrow from the bank, the lower your monthly payments will be. You'll also be saving money on interest. Keep in mind though, that you don't want to wipe out your savings to make a downpayment. It's important that you keep a cushion for closing costs, moving expenses, furniture shopping and any unexpected expenses that could arise with your new home.

Buying a home at the Lake of the Ozarks shouldn't solely be based on money though. Are you ready to take on the responsibility of caring for your own home? When you rent, the landlord takes care of any issues you may have, but once you buy, that's all on you. If you have questions regarding becoming a homeowner, give your Lake of the Ozarks mortgage lender a call at 573-746-7211. I'm here for all your home financing needs, and will discuss your options, helping you every step of the way!

For Lake area news, resources and tips on financial services, please 


Michael Lasson
Sr. Loan Officer
NMLS #: 493712

2265 Bagnell Dam Blvd, Suite B
PO Box 1449
Lake Ozark, MO 65049

Direct:  (573) 746-7211

Email:  mlasson@fsbfinancial.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

1 comment:


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