Many people are worried that their student loans will have an adverse effect on their ability to buy a home.
According to a new report from NeighborWorks America, many Americans believe that their student loan debt will compromise their ability to buy a home even though 92% of adults are convinced homeownership is part of the American Dream.
Currently, there are 44 million borrowers in the US, who owe a whopping $1.5 trillion in student loans. Every third adult knows someone who postponed the purchase of a home over student loan debt. 87% of millennials and 85% of older adults with student loan debt reported having concerns about their debt all or most of the time.
What can you do to keep loans from thwarting your homeowner ambitions? You could start by managing your debt-to-income ratio.
Before making a loan decision, a lot of lenders evaluate your debt-to-income ratio. This could affect the interest rate you receive. A debt-to-income ratio is the ratio of your monthly debt payments to your monthly earnings. Lenders focus on this ratio to decide whether you have enough funds to pay off your loan and cover your living expenses.
You could also consolidate a personal loan with credit card debt. How? Either apply for a mortgage only after you’ve paid off your credit card balance or consolidate your credit card debt at a lower interest rate into a single personal loan. This way, a personal loan can save you interest costs over the loan repayment term, which is 5 years on average.
