The period after graduating college is a unique time for many. Young adults are now entering the workforce and are ready for the next steps in their lives. One of these big steps is buying a house. Buying a house in Southern California is hard enough as it is. However, buying a house in Southern California with student loan debt? That’s enough to turn the toughest adult into a whimpering child again. Here’s what you need to know about buying a house in Southern California when you have student loan debt.
Turn to the Government
It’s federal loans that got you into this mess. Might as well turn to the government to help you while you get out. Explore the option of turning your federal loan into an income-centered payment plan. Based on your income, you can have lower monthly payments on your student loan. This gives you more money to put toward your mortgage.
Improve Your Credit Score
If you are concerned college debt will harm you from getting a mortgage, think again. Education is considered “good debt.” You should be more concerned about high credit card spending and paying bills late. These are the red flags that do far more damage to your credit report. So, if you are looking into buying a house in Southern California with student loan debt, get the rest of your credit in shape first.
Look into Pre-Approval
Buying your first home is like crossing uncharted waters. Getting a pre-approval from a lender helps you figure out what down payment you are looking at and the costs you can expect each month. This will help you organize your gameplan and concoct a budget.
To determine your qualifications, lenders weigh many factors including:
- Credit Report
- List of Assets
- Overall Income
- Two-Year Employment History
Keep in mind, these lenders are going to ask you a lot of questions. You must account for all large deposits into any bank account and any lapse in your employment history.
Get a Gift From Family
Need help with a down payment for a lender? Turn to your family. Your family can gift you up to $10,000 without being taxed. However, it must be a GIFT. You cannot tell a lender if it is a loan. You can’t use a loan, even if it’s from a family member, to pay your down payment.
Think About Assistance Programs
If family doesn’t have the means and you need a little extra help, look into a down payment assistance program. Southern California implements the MyHome Down Payment Assistance Program. As they explain on their website, “MyHome provides a deferred-payment junior loan – up to 3.5% of the purchase price, or appraised value, whichever is less, to be used for their down payment and/or closing costs.”
Now that you know these important tips about buying a house in Southern California when you have student loan debt, happy hunting!