Student debt has dragged down millions of college graduates’ financial health in the United States. The student debt crisis is now driven a national total of $1.6 trillion, leaving people with few options as to how they’ll make necessary purchases for their lives, including housing. Fortunately, you are not out of luck. Even with your crushing loan payment, you can still secure a suitable home for you and your family following the brief guide below.
Table of Contents
Start Small With Repairing Your Debt-To-Income Ratio
Your debt-to-income ratio is a critical factor in how mortgage lenders determine whether you are an eligible borrower or not. This ratio reflects how much of your monthly income is dedicated to paying down debts. If it’s too high, a lender will see little room in your budget to support a monthly mortgage payment.
Fortunately, your student loans aren’t the only type of debt that contributes to your debt-to-income ratio. This means that you still have the opportunity to lower it :
- Paying down revolving debt (i.e., credit cards)
- Consolidating or refinancing existing loans
- Paying down installment loans (apart from student loans, this will most likely be an auto loan)
Even if you don’t get your balances down too much, lenders will see you working to reduce your debt. This will reflect positively on your borrowing eligibility.
Get A Co-Signer
Co-signers are incredibly helpful to those who cannot qualify for a mortgage on their own. If there is someone close to you who earns a higher gross monthly income or has a better credit score, they are the best person to add on as a co-signer.
They can significantly impact factors such as the loan amount you’re eligible to borrow or the interest rates you’ll be subject to. Remember, though, that the only way to remove them from the loan is refinancing. Since refinancing can cost a few thousand dollars, keep this in mind for the future.
Seek Reliable Loan Assistance
Ironically, the same federal agencies that manage your student loans could help you with buying a home. For example, the following options with Fannie Mae are available to assist you:
- Student Debt Payment Calculation: Lenders can view data concerning your student loans on credit reports. This increases your chances of qualifying for a mortgage since lenders will be able to tell which kinds of debt are contributing to your ratio.
- Student Loan Cash-Out Refinance: When refinancing to a lower mortgage payment, you may have the option to improve repayments for high-interest student debt.
- Debt Paid Others: Non-mortgage debt will be excluded from your debt-to-income ratio, thus improving your mortgage qualifications.
Though you should still work on repaying existing debt, these options can significantly improve your chances of buying a home.
Work With A Dependable Mortgage Professional
An expert mortgage professional can help to reduce the burden of purchasing a brand-new home, even with your student debt. They can walk you through each step of the homebuying process, enlightening you to each possible financial challenge you’ll experience along the way, and advising you on how to overcome it. To increase your chances of qualifying for a mortgage, contact a mortgage professional today.