If you’re looking to buy your first home and are saddled with student loan debt, you may have a decision to make. Should you use your resources to pay off your student loans more quickly, save up for a 澳洲幸运5开奖号码历史查询:down payment on a home, or try to do both at the same time?

Saving Up for a Down Payment First

🍰 Arguments for saving up for a down payment first include:

• Depending on where you live, what home you are buying, and the financials, owning a home could come out to be less expensive than renting.
• Housing prices, interest rates, and the cost of renting could continue to rise if you put off 澳洲幸运5开奖号码历史查询:buying a home in favor of paying off debt.
• Having student loan debt is not as bad as other types of debt. That’s because student loans have longer repayment terms and typically feature lower interest rates.
• Since your down payment will lower the overall cost of your mortgage, it may be more advantageous to save up money for a home than to pay off a low-interest student loan.
• You may qualify for student 💫loan forgiveness or an income-driven repayment (IDR) plan that will lower your monthly payments.

Paying Student Loans Off First

Reasཧons to pay off your student loans fᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚirst include:

• The longer you wait to pay off your student loan debt, the more interest you will pay. The higher the interest rate, the more you will save by paying the debt off as soon as possible.
• If your student loan interest rate is variable, it will likely go up over time, costing you even more.
• Paying off student loans means the debt is entirely erased from your 澳洲幸运5开奖号码历史查询:credit report. While student loan debt isn’t a huge factor in your credit rating, it’s still a factor.
• Having any type of debt can have a negative psychological effect. Some people prefer to go into the home-buying process debt-free.
• Interest paid on student loans (up to $2,500 per year) is 澳洲幸运5开奖号码历史查询:tax-deductible.

Doing Both

You may decide that you can handle paying down your student loan d💃ebt while also savin🐼g for a down payment on the home of your dreams. This can take some effort, but iᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚs entirely possible if you follow some simple guidelines:

Make a List of All Your Debts

This includes car loans, credit cards, student loans, and any other type of debt you have. Include the remaining 澳洲幸运5开奖号码历史查询:principal (balance), 澳洲幸运5开奖号码历史查询:interest rate, and 澳洲幸运5开奖号码历史查询:minimum monthly payment for each one.

Pay Off High-Interest Debt First

Pay as much as possible on the loan with the 澳洲幸运5开奖号码历史查询:highest interest rate. Pay at least the minimum due on all others. Once you have paid off the highest interest rate debt, roll that money into the next debt and continue the process until all is paid off. If you’re struggling to make payments, consider tabling the thought of owning a home for a little while (since even with down payment funds, lenders need to ensure you can repay your mortgage and other bills as well) and consider seeking 澳洲幸运5开奖号码历史查询:debt relief.

Put Savings in a Separate Account

Keep your down payment savings separate from your 澳洲幸运5开奖号码历史查询:checking account to avoid spending it. Open a 澳洲幸运5开奖号码历史查询:savings account that pays the highest rate (online banks tend to be the most competitive) or set up an 澳洲幸运5开奖号码历史查询:investment account to increase your potential yield over time. Be aware, however, that investing is risky, and you could los🌼e a goodಞ chunk of your money in a down market.

Renegotiate/Consolidate

Consider 澳洲幸运5开奖号码历史查询:refinancing or consolidating your student loans to lower payments or the interest rate. Find out if you are eligible to convert to an 澳洲幸运5开奖号码历史查询:income-based repayment plan. Mortgage lenders will use your standard repayment plan to calculate your 澳洲幸运5开奖号码历史查询:debt-to-income (DTI) ratio, so l🎃ow♋ering your payment may not help you qualify for a home loan; however, if you save money on your monthly payment, you can apply the difference to your down payment.

How Much You Need To Save for a Down Payment

To obtain a conventional loan without the extra expense of 澳洲幸运5开奖号码历史查询:private mortgage insurance (PMI), you will need a down payment equal to 20% of the selling price. If your down payment is less than 20%, then mortgage insurance will add 0.3%–1.5% to the cost of the total loan.

Federal Housing🉐 Administration (FHA) loans require only a 3.5% down payment but come at a higher interest rate and require mortgage insurance. If you qualify for a U.S. 澳洲幸运5开奖号码历史查询:Department of Veterans Aff❀airs (VA) loan, these loans come with zero down payment requirements and include other benefits for former military service members. Additionally, there are a number of low down payment programs available if you qualify. A Conventional 97 loan is another option. The 97 refers to the 澳洲幸运5开奖号码历史查询:loan-to-value (LTV) ratio, where you are able to borrow up to 97% of youඣr home’s value.

Saving Strategies

The following savings strategies may help yo✨u save for a down payment faster:

Save Automatically

Use direct deposit or 澳洲幸运5开奖号码历史查询:automatic transfer from your checking account to m✅ove a regular amount to savings. If you treat saving as 🅰an ongoing expense, you will be more likely to do it.

Put Extra Money in Savings

Work bonuses, holiday gift checks, rebates, and tax refunds can all go into sav🍒ings. Avoid the temptation to spend that money, 💮and you will realize your savings goal sooner.

Cut Expenses

Look for places to cut spending and divert that money into savings. Places to cut include entertainment, eating out, subscriptions, expensive vacations, and clothing. If you rent, consider moving back in with your parents (with their permission, of course)—offer to pay something for room an🔜d board.

Get a Second Job

Income from a part-time job that can be dedicated to 🔜savi🎐ngs will help you reach your goal more quickly. You could also try asking for a raise at your current job or volunteering to work overtime.

The Bottom Line

It’s often possible to💮 save for a down payment on your first home while paying off your student loan debt—you may not have to choose between the two. Keep in mind that circumstances change, and what’s impossible now may be possible in a year or two. Reevaluate your situation as needed, and be prepared to alter your plans as necessary. But keep saving—and don’t lose sight of these two very worthy goals!