If you have student loans, you should not automatically think that the loans will disqualify you from purchasing a home. More and more people are graduating from college with a large amount of student loan debt. With a large amount of debt to their name, many people believe that home ownership is a mere fantasy that may never be achieved. But home ownership can be a possibility if you are able to successfully manage your monthly student loan debt payments.
Whether or not you will qualify for a home mortgage depends heavily on a few factors, including: 1) your debt to income (DTI) ratio, whether or not you have a large enough down payment, and 3) your credit score.
In many cases, it’s absolutely possible to qualify for a mortgage if you have student loan debt. If your income is high enough to support your monthly student loan payment, your other living expenses, and your proposed mortgage payment, you might qualify for a home loan. In fact, you might even qualify for a mortgage with a great interest rate.
What is Your Credit Score?
You should not assume that you have a low credit score just because you have student loan debt. You might have thousands of dollars in student loan debt, but your credit score might actually be quite high. As long as you make your student loan payments on time and in full each month, the debt should not cause your credit score to drop significantly. However, it’s important to keep in mind that if you are late making a student loan payment or if you do not make full payments, your credit score might be negatively affected.
Do You Want to Stop Paying Rent to a Landlord?
Many college graduates with student loan debt feel that they have no choice but to rent a home instead of purchase one. But in many cases, a monthly mortgage payment is actually less than a monthly rent payment. Without crunching the numbers, you might not realize that renting can be quite expensive. Additionally, purchasing a home with a mortgage allows you to make monthly payments towards something you will eventually own several years down the road.
Saving For a Down Payment
If you are dealing with a large amount of student loan debt, it’s important to save a little bit of money each month that can be used towards a down payment on a home. If you are able to afford at least a 20 percent down payment, you will have a much better opportunity to obtain a home loan with the best possible terms and interest rate. Saving for a down payment while also paying student loan debt might seem like an impossible task. However, every little bit helps and eventually, a down payment will be accumulated.
Don’t believe that you will never be able to own a home if you have student loan debt. Seeking the advice and guidance of an experienced mortgage broker is very helpful and will allow you to find a lender willing to offer you a mortgage with a good interest rate.