Many Millennials are hesitant to become first-time homebuyers for one reason, student loan debt. According to a nonprofit in Boston, American Student Assistance, more than half of the individuals with student loans delayed buying a home due to their debt. Millennials must consider if they can afford future mortgage payments in addition to their student loan payments.  college student debt load.

              Yet, many Millennials want to buy homes for many reasons. Interest rates are at all-time lows to encourage home buying. Millennials want to capitalize on these interest rates since they will save money in the long run. Also, the percentage of first-time buyers is lower compared previous years. This is driving up the demand for rentals and therefore, raising rental rates.

              To obtain a mortgage backed by the government, a borrower must have a monthly debt-to-income ratio below 43%. The ratio accounts for all debt; including credit card expenses, student loan payments, etc. If you make $3,000 per month and have debt payments of $1,000 per month, then you income-to-debt ratio would be 33.33%.

              Besides the debt-to-income ratio, a lender will also evaluate a Millennial’s credit score and the amount they can put down as a down payment. Minor factors that might also be considered include a borrowers citizenship and employment history.

              Millennials must strongly evaluate the amount of money they want to put down as their down payment. They should still have a savings account and enough money remaining to cover their monthly expenses. Plus, home ownership is expensive so they shouldn’t forget about closing costs, moving expenses, and unexpected home repairs.

              Lastly, if their financials are still not able to cover their dream home and student loans, they should consider buying a less expensive home. A more affordable home will require a smaller down payment plus smaller monthly mortgage payments but will still allow home ownership to be feasible.

By Anna Hellman

Leave a Reply