How to Buy a House With High Student Loans

It is the American dream to own a home, but for many recent college graduates, that seems out of reach due to outstanding balances on student loans. The loans were a necessary evil to complete your degree, but now they're haunting your future dreams. With a combination of knowledge, discipline and help from others, you too can own a home of your own. Here is a step-by-step guide to buying a house with high student loans.

Instructions

1. Check your credit with all three credit bureaus: Equifax, Experian, and TransUnion. Make sure there are no errors on your report. If there are, rectify that situation. This will help raise your credit score. Pay down your credit cards to less than 30% of the available credit to raise your score as well.

2. Consolidate your student loans if possible. This usually results in a lower monthly payment and a better interest rate. The lower monthly payment will free up more income to go toward a new home.

3. Save a little bit of money each month toward your new home, even if it is less than $100. Every little bit helps. Take on a second job or extra hours at work to help pay down debt and increase savings.

4. Ask your parents or family members for a gift for your down payment. Laws vary, but in most states family members can gift each other up to $11,000 each without tax consequences. Consult a tax adviser prior to accepting a gift.

5. Fill out an application with a mortgage lender to find out how much of a loan you could qualify for based upon your income and debts. Request information about VA, USDA and FHA loans. These types of loans require the smallest down payments, from 0% to 3.5%.

6. Ask your mortgage lender about first-time home-buyer programs in your area. Some areas have tax breaks, grant programs, and down-payment assistance programs as well. Research each option carefully to make sure it is right for you.

Tips & Warnings

• Look into foreclosed homes. Usually, they can be bought for less than the asking price, and with a little repair work, can make you a profit in the end. Remember, a home is an investment in your future.

• Consult a realtor in your search. Do not go it alone; the rules and regulations can be daunting, and you want an expert on your side to make sure you are not taken advantage of in the process.

References

• US Department of Housing & Urban Development
• FinAid (Student Loans)
• SallieMae For Schools