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Health & Fitness

Tips for the Younger Generation of First Time Home Buyers

Saving for a down payment for your first house can be tough, especially when you have so much college debt. Here are some tips to get going in the right direction!

Graduating from college is definitely a bitter sweet life altering event for most.  When the fun, carefree days of attending classes and partying come to an end with cramming for finals and writing papers, you find yourself asking, "What’s next?"  So you either apply to graduate school or find yourself a decent job and all of a sudden, you are an adult.

At some point down the line you decide it's time to buy your first home! This is such an exciting pivotal moment in life! Only problem is all of that student loan debt you racked up at college puts a big damper on what you can afford to buy... 

Debt to income ratio is becoming a common roadblock to owning a home for potential buyers in this day and age.  Even those making salaries that should allow them to purchase a relatively high-priced home are unable to because of significant college loan and grad school debt. 

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According to a recent CNBC report, the number of first time home buyers (more than half who are 25-34 years old) has been shrinking since the recession struck.  Young buyers now make up the smallest share of the housing market in more than a decade.  A report from the New York Federal Reserve suggests that graduates’ nearly $1 trillion in debt is beginning to hinder the economy overall, and is forcing the largest group of potential home buyers out of the market.

What Can These Buyers Do?!?!

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The MOST important thing to remember is that your Credit comes first!  Repaying your student loans on time should be a priority. This will help to establish and maintain a good credit score. With a tough job market and low starting salaries, recent graduates who make their loan payments usually don’t have much left over after paying for their living expenses to save for a down payment. Here are 4 strategies that might make home ownership more feasible for these young buyers:

1. Pay down the debt as much as possible

Lenders do not count debt against a potential borrower when they have less than 10 payments left on the loan. For today’s college grads, who average $25k debt or more, this can take years.

2. Involve a family member in the mortgage process

Buyers with a family member who can offer a financial gift towards a home’s down payment can reduce the total amount the buyer needs to borrow. 

3. Get a cosigner

Standard FHA loans allow a non-occupant co-signer, so buyers with a parent or relative willing to cosign the loan can help to increase their debt-to-income ratio and better their chances of obtaining a mortgage.

4. Buy with a friend

Today’s graduates may not have the finances to obtain a mortgage on their own so pairing up with a friend could increase a buyer’s chances of obtaining a mortgage – assuming both do not have considerable college debt. While this is a potential solution for grads looking to buy a home, anyone that enters into a home purchase with another needs to be very cautious and thoroughly think through the decision.

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