Forty-three percent of respondents in a survey conducted by Student Loan Hero reported that they have put off buying a house due to student loans. If you’re holding off on buying your dream house because of your student loans, you’re not alone. But do you really have to wait to purchase a home when you have student loan debt?
A borrower’s Debt-to-Income (DTI) Ratio is a key factor that lenders take into account when they consider offering a mortgage. Your DTI ratio tells lenders how much of your income goes to debts, giving them a good idea of whether you can afford a mortgage.
This means that lenders don’t care so much about whether or not you have student loan debt. Instead, what matters to them is if you have enough income to support both the debt you currently have and a potential mortgage payment. They want to make sure that you don’t have more debt than you can handle. If you have a high DTI ratio, that means most of your income goes to paying your current debt, and as a result, you’re less likely to secure a loan.
Remember that there are other factors that go into the mortgage approval process, including credit scores. Understanding your credit score and DTI ratio will help give you an idea of whether homeownership is attainable at this point in your financial situation.
Yes! Even with student loan debt, your DTI ratio could be low enough to indicate to lenders that you can still afford a mortgage. Even if it feels like you have a lot of student loan debt, as long as that debt, combined with the rest of your debt, doesn’t take up too high a percentage of your income, you could still qualify for a mortgage.
This might not be necessary if your DTI is low. If you have a reliable income and are on top of your student loan payments, you may be able to obtain a mortgage without paying off your student debt. However, if your DTI is on the high side due to your student loan debt, it might not be a bad idea to pay those loans down.
If you’re holding back from becoming a homeowner because of your student loans, you may be missing out on a great opportunity. You don’t need to be completely free of debt to get a mortgage. You do, however, need to have a manageable amount of it and a demonstrated ability to repay your home loan. Overall, lenders don’t mind offering mortgages to borrowers who have debt as long as they are convinced the borrowers can handle a mortgage payment.
Remember, when it’s time to get a mortgage, you’ll want to get prequalified or preapproved. We’re here to make the process as smooth, efficient, and easy-to-understand as possible. Reach out to us today and one of our Loan Originators will be there to answer any questions you may have and help you find the solution to your home financing needs.
Homestead Funding offers exceptional customer service and a convenient mortgage process. Whatever your financing needs, our goal is to exceed your expectations.