Can You Buy A Home With Student Loan Debt?
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Wanting to buy a home, but have student loan debt? There’s a myth going around that it’s incredibly difficult to buy a home with student loan debt and that’s simply not true!
You absolutely can buy a house with student loans. In fact, I help my clients do it all the time.
First, if you feel overwhelmed by student debt, know that you’re not alone. Student loan debt is a huge national crisis at this point. People go to college to get careers and move their life forward, but crippling debt slows down their momentum and can squash their hope!
So, don’t feel embarrassed by student loans. You can still gain wealth through real estate while in college debt.
How exactly will student loans affect your ability to buy a house? Mainly, lenders are going to look at your DTI or Debt-To-Income ratio. The Debt-To-Income is simply your total monthly debt payments divided by your gross (before tax) income.
So, if your income before taxes is $5,000 and your car payment is $300/mo, your credit card is $200/mo, your student loans are $450/mo, and your estimate mortgage payment is $950/mo, your DTI is 38%.
For Conventional loans, lenders normally want your DTI to be below 49%. For FHA, it’s usually capped at 56%.
So, student loans mainly affect your ability to buy a home based on how much debt you’re currently carrying.
The main tricky part about student loans is if you don’t have a minimum required payment on them yet (e.g. payment is deferred, forbearance, or income based repayment). In this case, a lender usually is going to take 1% of your outstanding balance and use that as a monthly minimum payment in your Debt-To-Income ratio. Usually, this isn’t terrible with lower amounts of debt. But, if you have a lot of debt, this might be tricky. For instance, if you have $150,000 in student debt and your credit report doesn’t show a minimum monthly payment, a lender has to use $1,500/mo as a minimum payment on your DTI ratio!
That’s where student loans can stop your home buying right in its tracks. (Note: if you’re in the medical field, lenders can sometimes ignore medical student debt)
For most people, they have minimum payments and they’re fine. If your payments are currently deferred, then you might want to talk with a Mortgage Advisor first and make sure everything is ok to move forward.
Hey, my name is Kyle and I’m a Mortgage Advisor serving Ohio and Tennessee. My goal is to help you get a crystal-clear home loan that helps you win the house you love. If you’re wanting to begin the planning the home buying process, you can reach through any of the ways below:
GET PRE-APPROVED: https://kyleseagraves.com
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Motto Mortgage Alliance
8900 N. Dixie Dr.
Dayton, OH 45414
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Can I Get a Mortgage if I’m in Debt, Can You Buy A Home With Student Loan Debt?.
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