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Saving money to buy a home is especially difficult if you make student loan payments.

For many millennials, saving to buy a home while making student loans payments is “close to impossible,” says Ronit Rogoszinski, wealth adviser for Arch Financial Group in Garden City, New York.

Whether it’s doable depends on:

  • How much you owe.
  • How much of your take-home pay goes toward student loan payments.
  • How much you spend on other things.
  • Your level of determination.

Millennials who get a nice starting salary with plenty of upside potential might be able to pay down their student loans and sock away money for a down payment, Rogoszinski says. Conservative spending has to be part of the equation.

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Debt-to-income ratio

Some millennials manage to buy homes while they’re paying off student loans because they don’t have much other debt, says Greg Cook, senior loan officer for Platinum Home Mortgage in Temecula, California.

Lenders use your debt-to-income ratio, often called DTI, to determine whether you have enough income to afford a mortgage payment.

Debt-to-income ratio

Percentage of monthly income that is spent on debt payments, including mortgages, student loans, auto loans, minimum credit card payments and child support.

Debt payments / income

For example: Jessie and Pat together earn $10,000 a month. Their total debt payments are $3,800 a month. Their debt-to-income ratio is 38% ($3,800 divided by $10,000).

If you don’t have a car loan or credit card bills, your debt-to-income ratio might make the grade even with your student loans.

Buy a home 1st, or pay off debt?

If you can’t pay off your student loans and save a down payment, which should you prioritize: buying a home or getting rid of the loans?

Jay Dacey, a mortgage broker for Metropolitan Financial Mortgage Co., in Minneapolis, says it’s better to buy a home sooner and focus on reducing debt later. Part of the thinking in this argument is that your education should help you get a better-paying job or the skills to start your own business.

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“We would advise saving enough for your down payment 1st before paying off your student loans,” Dacey says.

The dissenting view

Cook says paying off your student loans should be first priority because some mortgages allow you to buy a home with as little as 3% or 3.5% of the home’s purchase price.

“If your credit is in good shape, you don’t have to save that much,” he says — and if you can pay off the student loans, “that puts you in a better position to manage the cost of being a homeowner.”

A lower debt-to-income ratio might also help you buy a home that’s larger, in better condition or in a more desirable location, 3 characteristics that make homes more costly.

To consolidate — or not

Michelle Velez, a mortgage sales manager in San Mateo, California, says millennials who consolidate multiple student loans into 1 payment might be in a better position to buy a home because 1 payment can make paying off debt simpler and a lower payment can make it easier to qualify for a mortgage.

Karen Carr, a financial planner with Society of Grownups, a financial planning firm in Boston, says consolidating might help if you have private student loans, depending on how your new loan compares with your old ones.

“You really have to look under the hood of that new loan,” she advises. “It’s not so simple of an answer.”

Federal student loans are a different animal. If you consolidate those, the rate for your new loan will be a weighted average of the rates for your existing loans and the new rate will be rounded up to the nearest 0.125%, Carr explains.

“That’s not really going to move the needle,” she says, “and if you have a lot of loans, even that little rounding up can actually not do you any favors.”

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