Will Student Debt Prevent You from Buying a Home?

If you are in student loan debt, you can still buy a home! Learn what options you have and how you can take this next big financial step without plunging into deeper debt.

 

Start with your current finances

Improving your current financial situation is your best “first step” as you start looking into buying a home. If you take charge of your finances before you begin to apply for a mortgage, your lender is far more likely to approve you.

So, here are just a few ways you can begin moving in a positive financial direction!

  1. Know your debt-to-income ratio (DTI). This is how your lender will gauge your financial “fitness” and basically measures whether you can realistically pay back what you owe.
  2. Save for a larger down payment. If you’re able to save enough to afford a 20% down payment, your student loans will be far less likely to affect your home buying experience.
  3. Know your income and give it an extra boost. The more aware you are of what you bring in monthly, the better you will be able to measure and improve your DTI ratio. First, sit down and calculate how much you make per month. Then, consider looking for ways to increase your income (such as asking for a raise or helping your neighbor with their yard on your off days). The extra cash you make will greatly improve your DTI ratio and may be a great way to save for that substantial down payment!

 

Government loan options

If your student loans are federal, you may want to look into income-driven repayment. Other government options that are especially helpful for those in student loan debt are:

 

Other loan options

If these government financing options aren’t for you, a private lender may be just what you’re looking for. Some private lenders accept higher DTI ratios than others, so be sure to do your research if you choose to go this route. You may find that the rates for private lenders are more suited to your monthly income.

 

Find the answers to your most urgent home-buying questions today by contacting one of our friendly and knowledgeable staff!