If you are one of the many people with student loans and have thought you may never pay them off so you’ll never be able to buy a home, you’re not alone. We can help give you some information about the ways you can go about the home buying process if you are in this situation. Every situation is different of course, but getting some perspective on the process will help to make the decision on how to move forward that much easier.
Take Account of All Your Debt
If you’re new to the home buying process, you’ll need to know a few things whether you have student loans or not. The best way to secure a home is to get a preapproval letter from a lender. In order to do that, they will want to view your debt to income ratio. The most important factor to a lender is that you’re able to pay back your mortgage, so if you have a high DTI, this decreases your chances of getting approved.
In order to calculate your DTI, you’ll need to add up all your monthly payments, and be sure to include just the minimum payments due. Then add all your monthly expenses together and dive the number you get by your monthly income. Multiply that number by 100 and that percentage is your DTI.
Next, you’ll want to check out how your student loan debt compares to your income and DTI. If your DTI is about 50%, you may want to work on lowering it down before speaking with a lender in order to increase your odds at getting approved.
Focus on Your Student Loan Payments
If you owe on student loans, it’s important to note that lenders are not necessarily concerned with the amount of debt you have, they are more focused on how your income compares to that debt. This helps to determine if you are a reliable candidate for a loan and whether or not they think you can maintain your payments.
If your student loans are preventing you from saving any money, you may want to wait until you have more of your monthly income available and less is going to the student loans. Having a nice savings will make you look like more of a responsible candidate, and keep you from falling behind on mortgage payments in the case of an emergency.
Moving Forward With the Process
Buying a home before completely paying off your loans means you may not qualify for a conventional loan depending on how much you owe at that time. If you find yourself in this situation, you may want to think about alternative routes to purchase a home like an FHA or VA loan.
Another thing you can do is to pay down another debt to help lower your DTI if you are unable to make an extra payment on your student loans. You can also try picking up extra hours or a part time job in order to increase your income. This can help with your DTI as long as you can provide proof of your income to your lender.
Contact Us Today
Reach out to your team if you’re looking to buy a home and would like more information on what it would take to get you qualified with or without student loans. Give us a call at Commonwealth Mortgage Corp in Conroe, TX today!