If you’re carrying student loan debt, you may wonder if you should pursue homeownership. Well, you’re not alone. There are millions of hopeful first-time homebuyers who are dealing with cumbersome student loans.

What effect will your student loans have on your ability to get approved for a mortgage and buy a home? Let’s answer that question now.

Do Student Loans Affect Homebuying?

The simple answer is YES. Carrying student loans can hinder your ability to purchase a home. However, they don’t make it impossible. You just have to factor them into your financial picture and work around them.

Student Loan Debt Factors Into Your DTI Ratio

Lenders look at your complete financial picture before they approve or deny you for a mortgage loan. The debt-to-income (DTI) ratios is one of the criteria. This calculation compares how much you owe (debt) against how much money you make (income). A large student loan can cause your DTI to be too high to get a mortgage.

Student Loans May Hinder Saving for a Down Payment

Big student loan payments can strap you financially. They can even tax your budget so much you don’t have any funds to stash for a down payment. Since some mortgage loans can require a significant down payment, not being able to save can complicate your homebuying plans.

Late Payments Can Tank Your Credit Scores

If you pay your student loan payment late, it will be reported to the credit bureaus. Payment history is the single biggest factor that drives credit scores, so late payments are detrimental to your credit history. Lower credit scores are one of the most common reasons consumers don’t get approved for a mortgage loan.

How to Buy a Home When You Have Student Loan Debt

If you have student loans and want to buy a house, follow these tips to help you achieve it:

• Always make your payments on time. This will protect your credit score and help you build positive credit history that lenders love to see.
• Find ways to save. Downgrade your lifestyle and get a second job or side hustle to help you sock away money for your down payment.
• Avoid more debt. Put the brakes on using your credit cards or purchasing a new car. Avoiding new debt can keep your DTI ratio in good shape.
• Manage your expectations. Consider buying a lower-priced house. Shopping outside the hottest neighborhoods, buying a fixer-upper, or settling for a smaller yard can decrease your mortgage commitment and make it easier to manage along with your student loans.
• Work with a trustworthy loan officer. An experienced lender is priceless in helping you navigate the mortgage approval process. They can look at your finances and credit score, and lay out your options.

Are you interested in started your homebuying journey? Contact MIG today to get pre-approved!

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• Source: https://migonline.com/blog/2023/08/09/buying-a-house-when-you-have-student-loan-debt/