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Mortgages for Grads With Student Debt: 5 Tips From Your Future Self

July 31st, 2017 by Ima Admin

So, you’ve recently graduated from college and your world is unfolding. Maybe you’ve finally landed a good job in your field and are thinking about buying a new car or getting a nicer apartment, one with a view.

Stop right there, says Jonathan Arnold, manager of Inlanta Mortgage Grand Rapids.
Your future self would like a word with you.

“We get so many calls from recent grads with student loans. After about 10 minutes of discussion, a scenario emerges: The caller has high loan repayments, car debt, credit card debt and zero in a 401k. This is where we try to explain how home ownership fits into the overall picture as it relates to their 20, 30 and 40-year positions in the world,” Arnold says. “So many lose opportunities to establish financial stability between the ages of 20 and 30. If only they could hear the advice their future selves would give.”

Advice from Your Future Self:

1. If you know you’re going to stay in the area for even a few years, buy, don’t rent.

The hard reality that everyone faces is that you’re going to have to have housing one way or the other. It can feel overwhelming when you have substantial student debt. But instead of making your landlord rich, invest in an affordable property. The benefits are two-fold. First, you can deduct your interest. Secondly, over the next 10 years, you’re very likely to build equity.

“If instead of renting, your present-self bought a house in this thriving market, in 10 years your future self might have 30k equity in addition to the tax write offs of interest and property taxes.”

Inlanta Mortgage has programs that require no down payment. With some good advice and some tax return planning or family gifting, home ownership is more in reach than many grads realize.

2. Don’t wait to meet your “significant other” to buy a house.

The next reason young grads wait to buy a home is the traditional idea that they should wait until they’ve met their significant other. While pairing up does double what you can afford, it doesn’t make sense to put wealth-building on hold until the right guy or gal comes along.

3. Don’t buy a new car, and don’t lease. Buy a second-hand car, cash.

Stop and think before you finance a new car. However low the payments may be, those payments will affect your debt-load ratio in qualifying for a mortgage, and your return on investment on a new car is zero. Save the new car smell for your reward after you’ve spent a few years getting your financial feet under you by building equity and contributing to a 401k first.

4. Manage credit wisely.

Many grads think they won’t be eligible for a mortgage due to high student loan repayments, but in actuality, government-backed loan programs take repayment into consideration at a 1% of balance rate, even if its in forbearance. If your payments are current, and there’s room in your budget, student loan debt does not have to scuttle your homeowner dreams.

The area some grads run into trouble with more frequently is actually credit card balances, ratios and repayment timeliness. Get familiar with how mortgage lenders view your score, and read Inlanta’s Guide to Credit as a primer.

5. Invest in your 401k to strengthen your future fiscal freedom.

Inlanta team members counsel young grads to plan on contributing to a 401k, and to include this plan when determining mortgage affordability. Working with a team member will help prioritize your best moves to build future financial stability.

“Young graduates should be arming themselves with information to understand what their big-picture options are. We’re always happy to help put together a plan so they can proactively build their fiscal position,” Arnold says.

So listen to your future self and start building that wealth today. Contact the experts at Inlanta Mortgage Grand Rapids to get started!