Have student debt but tired of renting? With a solid budget and some careful planning, you can go from renter to homeowner. Here are three ways to get started.
Know your numbers.
Before you call a real estate agent and start house shopping, look at your finances down to the very last penny. That's the best way to understand your budget and how much you can afford. Generally, it's best to keep your housing budget—including the loan payment, taxes, and insurance—below 28% of your income before taxes.
Consider a mortgage-friendly debt makeover.
Check out any options you may have for consolidating student loan debt and see if you qualify for income-driven repayment plans. These options could help you get a lower interest rate and reduce your monthly payments so you can pay off your loans faster and save for a down payment. That's a win-win.
Build a savings cushion.
When you do become a homeowner, it's good to have savings to cover unexpected expenses, like fixing a fussy furnace or replacing a leaky hot water heater. Home repairs and projects can be expensive, especially if you're not expecting them. So building up a savings cushion can give you peace of mind and help you avoid more debt. Set up an automatic transfer into a dedicated savings account—even $100 a month adds up.