07 Feb Can I buy a property if I have student loan debt?
Most Canadian graduates finish their post-secondary education with an average of close to $17,000 in debt, according to the Canadian Federation of Students. They are ready to begin their careers. Many start to also think about starting a family and buying a property. The question is: with all the current difficulties to save for a downpayment, and the fact that at the beginning of one’s career the entry-level salary is around the $40,000 mark, plus the student debt, can a person buy a property?
Nowadays, undergraduate tuition fees are about $6,500 per year. You need to add to this the cost of books, travel, supplies and rent (if you are not living at home). Once you get a degree, it also takes time to get the dream job. It’s no surprise then that most graduates are wondering if they can qualify for a mortgage given the debt from post-secondary education and the entry-level salary.
If you are part of this group, we can tell you it is possible – not easy, but possible. You don’t need to be debt-free to get a property. Student debt is not as serious of a debt as a credit card debt, for instance. The “benefit” of this debt over any other one is the fact that they have low interest rates, there are certain tax breaks and the payments are more flexible than the credit card ones.
So, what should we consider? We’ve said this many times before on our podcast, videos and other blog posts: lenders look essentially at two important things: your debt-to-income ratio and your credit score. (Check our blog posts on these two topics). It’s not the student loan that is an issue, but how much you have to pay and how consistent you are in paying it. The more debt you have, the less mortgage you are going to qualify for. If you miss payments, it will not work to your advantage. It will actually severely impact your credit score, thus affecting your ability to qualify for a mortgage.
Get started! Begin immediately to track your spending. This will allow you to know how much you can spend without being house poor (see our blog post on this). This is where we come in: we can help you determine what you can really afford to still live a comfortable life, to create a budget where you allocate your net income and track your spending. As you can see, it may not be easy, but it is possible to qualify for a mortgage and head into the homeownership world.