Once your personal life points firmly toward home ownership, there are additional factors to consider. Below are 5 additional factors that could indicate that it is time to consider purchasing a home. Keep in mind that everyone’s situation is different, and this criterion is a starting point. The more criteria you fit, the better, but think of this as a guide, not a mandatory checklist.
1. You have a low DTI.
It is important that your front-end DTI is significantly less than 28%. If you have reached this point, it is a good indication that you may be ready to take on the responsibility of paying your mortgage while maintaining your commitment to paying back your student loans.
2. You’ve been saving and have a sizable down payment.
If you have saved enough for a 20% or higher down payment, it probably means you have been practicing establishing the consistency that it takes to take on a mortgage.
3. Your budget includes and comfortably supports the costs accompanying home ownership.
It isn’t enough to plan for a down payment. There are countless costs associated with home ownership. Take them into account when you make your budget.
4. Use your money more wisely and efficiently.
When purchasing a home, you build equity, but that isn’t the only factor to take into account. Depending on the area and market in which you purchase, you could literally enjoy more indoor and outdoor square footage, nicer (unshared) amenities, and walk away paying less per month than you would as a renter.
Another option is renting out part of your new home to a tenant or roommate. If you play your cards right, the rent from the occupant could cover most, if not all, of your mortgage. The money you save can be used to further pay down your student loans.
5. You primarily have low-interest, unsecured student loans.
Compared to other types of debt, such as credit-card debt and auto loans, student loans tend to be the least pernicious. The rates on student loans are often times substantially lower and offer a longer period of repayment. Unsecured student loans are even better because in the event that your finances get tight, there is no risk of losing any personal collateral (i.e. your new home).
Notes: There is no definitive right or wrong answer when determining when (or if) you should purchase a home while you still have student loan debt. If you have consistently paid your debts on time, and believe you are ready, don’t let having student loans deter you. Take the time to evaluate your finances honestly, pick a home that you can reasonably afford, weigh your options carefully, and make a decision that best impacts your personal finances, goals, and priorities.
