Blog Highlights
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Decide: Determine whether you’re ready to buy a home right now or if you need a little more time before committing.
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Consider: Understand how student loans play a role in your homebuying and financial journey.
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Prepare: Assemble a financial plan that will set you up for success in becoming a homeowner.
Student loan debt is real…but so is the dream of owning a home. Being a homeowner is still one of the biggest milestones many young adults dream about. But for Millennials and Gen Z, it can feel out of reach. If you’re feeling like the road to homeownership is more like climbing a mountain than walking a straight path forward, you’re not alone.
Are You Ready to Settle Down?
Your goals and lifestyle play a big role in determining whether you’re ready to buy a home. Reflecting on these questions can help you figure out where you stand.
- Do you know where you want to live? If you’ve found an area, neighborhood, or community that feels like home, you may be ready to plant your roots.
- Do you plan to stay in one place for a while? If you can see yourself living in the same place for at least a few years, this is a good indicator that you’re ready to settle down. But if you’re still finding a place that fits your lifestyle, giving yourself a little more time to explore might make more sense.
- Are you planning a big career change? If your job feels stable and you’re not planning a career change soon, homeownership may be a natural next step.
Becoming a Homeowner While Balancing Student Loans
Student loans don’t have to prevent you from becoming a homeowner. With a little bit of patience and thoughtful planning, buying a home could be much closer than you realize. Here are five practical tips that’ll help you move closer to owning a home without letting student loans hold you back.
1. Consider Your Debt-to-Income Ratio
Like other debts – car payments, credit cards, etc. – student loans affect your debt-to-income ratio (DTI). Lenders look closely at your DTI as a metric to determine whether you can comfortably manage your monthly bills. If student loans push your DTI too high, it may limit the amount you can borrow. You can work around this by:
- Refinancing or consolidating student loans to lower monthly payments
- Paying off small debts first (snowball method) like credit cards
- Boosting income through side hustles or career growth
- Avoiding new loans or maxing out credit cards
Helpful Tip: Use a debt-to-income calculator to understand the factors that impact this metric of your financial health.
2. Get Real About Your Budget
Determining if you can comfortably afford the expenses of homeownership along with student loan payments is essential. Homeownership comes with other expenses besides the monthly mortgage payment. Costs like insurance, property taxes, maintenance, and more should be factored into your house buying budget.
Helpful Tip: Start by taking a realistic look at your budget – does the idea of those extra costs feel overwhelming? If so, try this exercise to test your financial readiness. Let’s say your rent is $1,700 a month, but buying a house would increase your payment to $2,100.
- Open a savings account with an automatic transfer for that extra $400 each month.
- Commit to it for three months.
- Are you able to comfortably afford the extra $400 without cutting into other goals?
This proactive step gives you a clearer picture of how homeownership might impact your budget and helps you prepare for the financial responsibility. It's also a great way to start saving for your down payment (more details below).
3. Strengthen Your Credit Score
Your credit score has a direct impact on mortgage eligibility and the interest rates you’re offered. Your student loans – and how you manage them – can affect your credit score. Here’s how:
- If you make regular payments on time, your credit score benefits.
- If you miss payments or have loans in default, your credit score suffers making it difficult to qualify for a mortgage and may result in higher interest rates.
If your credit score isn’t where you’d like it to be, there are ways to improve it:
- Pay bills on time: Set up automatic payments so you never miss a bill.
- Keep credit card utilization low: Aim to use less than 30% of your available credit.
- Avoid opening or closing accounts: Don’t open new credit card accounts or close out existing ones. The longer your credit history is the better.
- Pay down debts: Focus on lowering or reducing loan balances.
If you have less than perfect credit, you can also explore options for adding a co-signer or co-borrower to your loan. However, it’s extremely important to discuss and follow a plan for repayment to ensure financial obligations are met.
4. Explore First-Time Homebuyer Programs
Many states and credit unions offer special programs designed for first-time buyers. Taking advantage of these programs can help you get into a home sooner and with less upfront cash.
These may include:
- Fixed and adjustable-rate options
- FHA and VA mortgages
- Options with as little as 10% down
- Other programs including ones with favorable terms even if you’re managing student loan debt
Helpful Tip: Plug in numbers with our online mortgage calculator to see how much house you can realistically afford in your budget. Follow the 28/36 guideline which states housing costs should not exceed 28% of your gross monthly income, and total debt, including housing should not exceed 36% of your gross monthly income.
5. Save Strategically for a Down Payment
Balancing saving with paying off student loans isn’t easy, but even small, consistent efforts add up over time. Remember that automatic transfer suggestion we mentioned above? The good news is that exercise is two-fold – it helps you test your financial readiness AND can also be used as a savings for your future down payment.
Helpful Tip: Research down payment assistance programs and grants offered through your state and local housing agencies. Georgia residents, visit Georgia.gov or usa.gov. South Carolina residents, visit schousing.sc.gov. Check with your local lender for additional information and resources.
Homeownership IS Possible When You Have Student Loans
Owning a home while paying off student loans may feel like a juggling act, but it’s not impossible. At Peach State, we offer a complete suite of home loan programs, tools like our ‘How Much House Can I Afford' eBook, financial calculators, and other educational resources to help you achieve your homebuying goals.
As a member, you also have FREE access to HUD-Certified housing counselors through Balance. They can even help with setting a budget, reviewing credit reports, explaining the homeownership process and more.
With intentional budgeting, credit building, and exploring programs built for first-time buyers, you can take meaningful steps toward homeownership without student loans holding you back. Remember, it’s not about being debt-free before you buy a home – it’s about being financially prepared by making smart money moves.
For more helpful reads about becoming a first-time homeowner, check out 5 Mistakes to Avoid as a First-time Home Buyer and Buying Your First Home: Terms, Tips, and Traps.
