If you wanted to buy all the homes on the US real estate market, you’d need around $780 billion, according to Realtor.com. To pay off all the outstanding student loan debt in the US, you’d need $1.5 trillion.
Why is student loan debt nearly double today’s real estate market? It’s because almost 43 million Americans are shouldered with student loan debt, and this burden is blocking many of them from homeownership.
This statistic isn’t surprising when we compare the typical down payment for a home to average student loan amounts: $26,000 versus $34,500. Twenty-six percent of Millennials say student loans are the main obstacle they face when trying to save up for a down payment on a home.
Fortunately, there are many options for buyers in this situation. If you’re among them, here are some steps you can take to put yourself on the right track.
Improve your debt-to-income ratio: This ratio is key to qualifying for a mortgage. Lenders want to make sure you can handle the additional house debt with your current income. To improve your ratio, pay down (or pay off) any debts where you can, and increase your income if possible. Consolidating your student loans may also help.
Improve your credit score: Your credit score is another critical number that lenders consider. To increase your score, pay all your bills on time, avoid opening new lines of credit, and lower your use of credit. It’s also a good rule of thumb to check your credit report at least once each year to ensure it is accurate. If there are any errors, report them to the credit bureau immediately.
If you or someone you know is facing student loan debt and are interested in learning more about your options, I can connect you to a mortgage professional who can help you make owning a home a reality.