Today, there are millions of Americans who are saddled with student loan debt. If you were born between the early 1980s and the early 1990s, you may be one of them, but you also may be wanting to purchase your first home – and that will likely require a mortgage.
The reality is that your student loan debt can pose an issue for you, as it can skew your monthly debt-to-income ratio. This can, in turn, can make it more difficult to qualify for a loan. But, the good news is that the situation may not be as bad as you might think. Here’s why…
In order to come up with your debt-to-income ratio, a lender will look at what it costs to service only your actual loan debt, and not your overall debt burden. So, for instance, taking a gross income amount of $4,000 per month, and a debt amount of $900 per month (inclusive of an auto loan, credit card payment, and student loan), then your debt-to-income ratio would be 23%. If you then, for example, applied a monthly mortgage payment of $1,000 to this, your debt-to-income ratio would rise to 48%.
However, if you were able to simply reduce your total payments by just $300 per month, your debt-to-income ratio would go down to 40% – which would give you a much better chance of qualifying for a mortgage.
Some ways that you could accomplish that might include:
- Paying off your lower debt balances
- Consolidating balances
- Reducing your other living expenses
- Increasing your income (possibly by getting a part-time job – even temporarily)
You could also consider putting a larger down payment on your home. This would allow you to have a smaller house payment.
If you’re considering purchasing a home in the future, but you have student loan debt, there may still be solutions for finding – and obtaining – the home that you want. Give us a call and we’ll figure out a way.
