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Bad Credit, Good Credit: How Student Loans Can Roadblock Home Ownership

Some Things to Know and Remember

By Susie EstradaPublished 6 years ago 3 min read
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A Photo of Me Thinking About My Student Loans at Graduation

At the end of every year, we make our resolutions. "I vow to lose 20 pounds this year," or "I vow to finally visit London!" For the past three years, my resolutions have involved milestones that would be helpful in being to able to finally own a house. Towards the end of 2017, I found a broker and a real estate agent. I paid off massive amounts of credit card debt and was able to get my credit score high enough (upper 600's) to qualify for the first time home owners grant which would mean having low interest and zero money necessary down.

"Finally!" But here's the thing that no one had ever warned me about and it's these four little words that have made my train to home ownership stop dead on its tracks: debt to income ratio. Even though I am still in school and my student loans are deferred, my student loan debt is still counting against me and is the only obstacle now impeding me to get pre-approved for a housing loan.

So here is what my education looks like. I have a Bachelors of Arts in Child and Adolescent Development with a minor in Psychology and Childcare Administration. I graduated with honors! I also have a Masters of Education in Education, Culture, and Society and I am also finishing up my Masters in Public Administration which I'll have completed this December. All of this has added up to a little over $100,000 in student loan debt. I have a lot of feelings about having this high amount of debt. It's as if in order to get the education I need to be successful and financially stable, I needed to throw myself into debt, thus putting me back to square one financially.

So here is my recommendation for all of you that even think you'll want to buy a house eventually but are still in school. Student loans are okay.

  1. Take out only as much as you need: I know that I needed to take out the amounts that I needed to be able to survive despite also working a part-time job while in school. Take out only the minimal amount to keep your loan amounts as low as possible.
  2. Set up a Pay As You Earn plan now: When you do want to purchase a house if you can show that you have already started making some payments then it will look good on your behalf. It will also keep your total loan amount low and help with the interest at least. Even if you are still in school, if you do a PAYE plan then your payments are minimal but still super helpful.
  3. Get your documents in order: Make sure that your PAYE plans and payments are recorded. Have proof that your payments are low, collective of all your loans, and that you are in fact making your monthly payments. The way that your loans at looked at in calculating your debt to income ratio is that 1 percent of your total amount is taken as your monthly payment and so if you can prove that your actual payment is smaller (in my case way smaller) then it'll help you not only get approved but get approved for an amount that will make homeownership worth it.

Being a student is hard and I made the mistake of avoiding even thinking about what my future with student loans was going to look like. I am 26-years-old and had to really decide if I wanted to pursue my Ph. D. and honestly, I am exhausted. I'm ready to start enjoying my family without having to cut out family time for school. I am already successful and happy with what I have accomplished especially when statistically I could have easily not even finished high school. But here I am and so while I think it's unfair that getting an education is whats costing me my house right now I know that with time I'll get there. My hope is that you will too!

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About the Creator

Susie Estrada

I was reassembling, now I'm living. Twenty-six-year-old Xicana, Bruja Feminista, y chingona. PTSD and depression couldn't stop me once I found God in myself... (quote by Ntozake Shange).

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