Tips on buying a Boston condo for sale with student loan debt
Buying a Boston condo for sale with student loan might seem out of reach for many people. But the reality is, your student loan debt shouldn’t hold you back from buying a Boston Seaport condo. Before you decide to take the leap, sit down, review your priorities, and make sure you are ready to take on this responsibility. Are you confident about your income? Is it large enough to comfortably take on a mortgage payment on top of your student loan payments? What other area of your life will have to be scaled back? Here are five things you’ll need to do when buying a house with student loan debt.
Lower Your Student Loan Payments
Your student loans can give you a high debt-to-income ratio. Refinancing your student loans or switching to an income-driven payment plan will help lower your payments, decrease your DTI ratio, and prove to a lender that you have the funds to make mortgage payments.
Before making that decision, be aware of the trade-offs involved with both options. If you choose to refinance federal student loans, they then become private loans. You will lose federal protections, including access to income-driven plans and federal forgiveness programs. An income-drive plan will cap your payments at a percentage of your income. If you choose this route, the amount of interest paid will increase over time because the term length will be extended.
Generally, mortgage lenders won’t care if your overall student debt increases, their primary concern is your monthly payment. But to save the most on your student loans, you’ll want to minimize the amount of interest you pay over time.
Improve Your Credit Score
The biggest thing that lenders look for when deciding whether to approve you for a Boston Seaport condo loan is your credit score. Here are a few ways to boost your credit score ahead of applying for a mortgage:
PAY YOUR BILLS ON TIME
This is the most important factor in your credit score. If you pay on time and in full you can build a solid financial foundation.
DON’T CLOSE OLD ACCOUNTS
Closing a credit card account might seem like an easy fix when trying to build your credit score, but often that’s not the case. An old account in good standing can help your credit. The longer your credit history and average age of your accounts, the better.
USE DIFFERENT TYPES OF CREDIT
A mix of revolving credit (as credit cards) and installment loans (car payments or student loans) show you are capable of handling different types of credit.
MANAGE YOUR CREDIT UTILIZATION
The ratio of your credit balance to your total available credit is your credit utilization. Ideally, you want to manage your credit utilization so you aren’t using more than 30% of your available credit.
Save for Closing Costs and a Down Payment
Buying a Boston Seaport condo involves more than just taking on a mortgage – you’ll also be responsible for paying the down payment and closing costs upfront. Closing costs include home insurance premium, title fee, mortgage insurance, mortgage loan origination, and the home inspection. Overall, closing fees cost the average home-buyer about 2%- 5% of the total cost of the home’s price.
Traditionally, a down payment is about 20% of the cost of the home. But today, buyers have other options such as putting less down and paying for private mortgage insurance monthly until building 20% in equity. Just be aware, the less you put down the more you’ll pay in interest.
Consider Down Payment Assistance Programs
There are several down payment assistant programs that lenders will accept. Look into whether your state or city of residence may offer down payment assistance programs. It’s also possible to take advantage of federal loan programs – even though you already have a student loan, you could qualify for an FHA loan. This could mean a down payment of as little as 3.5%. If you choose to buy your home in a more rural area, you could qualify for a USDA loan which does not require a down payment at all.
Research your options and talk to an experienced mortgage broker to find out what programs you may qualify for at the federal, state, and local levels.
Take Your Time and Choose a Home You Can Afford
Taking your time is the most important piece of advice that we can offer. When you make the decision to buy a home, it’s easy to get carried away. You might think you need to buy a house right away, with all the amenities and appliances you’ve ever dreamed of. But chances are, it’s not in your budget. Be aware that as a first-time home buyer, you’re likely buying a starter home which you will eventually grow out of.
Spend time analyzing what you’re looking for in a house, what are you needs and wants, what kind of neighbors would you like to have, and what can you realistically afford. When it comes to price, consider the 28/36 rule. 28 refers to the percentage of your gross monthly income that you should spend on your monthly housing costs. And 36 refers to the total debt payments you make – including your mortgage.
Over the course of 20 years in the Boston downtown real estate market, John represented and sold numerous, condominiums, investment and development properties in Greater Boston and in the surrounding suburbs
In addition to representing Boston condo buyers and sellers, John is currently one of the most recognized Boston condo blog writers regarding Boston condominiums and residential real estate markets. John's insights and observations about the Boston condo market have been seen in a wide variety of the most established local & national media outlets including; Banker and Tradesman, Boston Magazine The Boston Globe, The Boston Herald and NewsWeek and Fortune magazine, among others.
For over 24 years, John Ford, of Ford Realty Inc., has been actively involved in the real estate industry. He started his career in commercial real estate with a national firm Spaulding & Slye and quickly realized that he had a passion for residential properties. In 1999, John entered the residential real estate market, and in 2000 John Started his own firm Ford Realty Inc. As a broker, his clients have come to love his fun, vivacious, and friendly attitude. He prides himself on bringing honesty and integrity to the entire home buying and selling process. In addition to helping buyers and sellers, he also works with rental clients. Whether you’re looking to purchase a new Boston condo or rent an apartment, you’ll quickly learn why John has a 97% closing rate.
Charles River Park
Surrounding Communities of Boston
John Ford and his staff can be reached at 617-595-3712 or 617-720-5454. Please feel free to stop by John's Boston Beacon Hill office located at 137 Charles Street.
Ford Realty Inc
137 Charles Street
Boston, Ma 02114