It isn’t uncommon to have tens or even hundreds of thousands of dollars of student debt. While it can make it harder to buy a home, it doesn’t necessarily disqualify you from doing so, either. There are several factors that lenders will look at when deciding whether you are a good bet to pay back a mortgage loan in full.
Make Sure Your Credit is Good
Lenders will take a long look at your credit report when making a loan decision. Ideally, you should have a credit score of at least 640 as well as a credit history that is free from missed payments, repossessions, and bankruptcies. However, there is still a chance that you could build up your credit and get approved for a home loan even if your credit history isn’t spotless. Whether or not a bank or credit union will overlook your past mistakes largely depends on your income, assets, and other factors that could work in your favor.
Look at Assistance Programs
Realtors are increasingly aware of the student debt that prevents many would-be buyers from purchasing a home. However, FHA loans and other government mortgage products could make it easier to become a homeowner despite your student loan obligation. Depending on your income, it may be possible to qualify for local or state down payment or closing cost assistance programs. In exchange for living in a home for a certain number of years, you can receive a grant for your down payment or other expenses related to owning a home.
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When Are Your Loans Due to Be Paid Off?
Generally, a lender won’t consider any loans that are due to be paid off within the next ten months when calculating your debt-to-income (DTI) ratio. Therefore, if your student loans are going to be paid off in the next several months, it won’t have much bearing on your ability to get a mortgage. It may be worth your while to refinance your loans to reduce their term and their potential to derail your mortgage request.
If you are looking to buy a home, it may be a good idea to speak with a real estate agent or mortgage broker. This may help you gain insight into how the mortgage application process works and whether you are likely to qualify for a loan soon or what you might need to do to improve your chances of receiving a home loan.
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