Political speaches and comments commonly refer to the high level of “student debt” existing in the USA, its effects and possible solutions … So just how much of that debt is there?
Options around student debt to buy a home
- 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
… yes, double the value of every home listed for sale in the entire USA.
Why is student loan debt nearly double today’s real estate market? Because almost 43 million Americans are saddled with student loan debt. It’s a very real burden blocking many of them from homeownership.
This 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.
Getting out of renting and into owning is vital for long term wealth accumulation. Check out this post … Your Home as an investment.
Fortunately, there are ways to minimize the impact of student debt. Here are two of the most important.
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 burdened with student loan debt and are interested in learning more about your options, I can connect you to a mortgage professional who can put you on the track toward making owning a home a reality.