Debt from student loans can have a big impact on your personal finances, which includes if you can buy a house. While it's not impossible to qualify for a mortgage, you may find it more challenging. When you currently have debt from student loans, know what you should do to get a mortgage.
How Is Buying A House Impacted By Debts From Student Loans?
One of the key things that a mortgage lender will look at when getting a loan is your DTI (debt-to-income) ratio. It essentially takes all of your debts and compare them to the income that you make on a monthly basis. If a lot of your income is going towards paying off those debts, you will have a high DTI ratio, which makes you more risky to give a mortgage to.
Student loans are factored into your DTI ratio, along with a car payment, credit card debt, or any other loan that you have received. The fear from the mortgage provider is that you will not have enough money left over to pay your mortgage after you address other debts.
What Can Be Done About It?
If you do have student loans that need to be paid off, you can still get approved to buy a home with a mortgage. You may need to make adjustments that will help show your mortgage providers that you are able to afford those house payments.
For those that have a lot of student loan debt, look into ways that you can make the payments smaller. By stretching payments out over a longer period of time, your minimum monthly payments will be lower, which helps your DTI ratio become lower.
When you have multiple student loans that you are paying off at the same time, try to consolidate those loans into a single loan. This can actually help you get a lower monthly payment, as well at negotiate a better interest rate on both of the loans.
Your agent may be aware of programs that are out there for people buying their first home for sale. There could be a federal or state program you're eligible for that will assist with your closing cost or down payment. Local agents should know about city financial aid programs based on where you are looking to buy a home.
By doing these things, it should help make sure you have as many things as possible in your favor when getting a mortgage for your home.