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Doing Double Duty

Posted on June 22, 2022 at 10:21 AM by Danielle BrownWolf

How to secure a mortgage while dealing with student loan debt

Your debt-to-income ratio is one factor mortgage lenders consider when deciding on loan approval and rates. So if you’re struggling with student loan debt — which stands at $1.6 trillion total — it can be tricky securing a loan for a new home. Don’t be deterred. Try following these tips for securing a new home even while juggling student loan debt.

Get Ready

Before applying for a mortgage, get your finances in order. If you have other debts, pay them down as much as possible. You want your overall DTI (debt-to-income ratio) to be less than 35 percent. Make sure you’re paying bills on time and have a credit report — with a credit score as high as possible — ready to show to your lender.

Know the Time Frame

Your student loan debt isn’t all bad. In fact, if your loans are quite old, they will actually help you with your credit score. That’s because if you’ve been paying them ontime, the older debt shows lenders you have a solid payment history. Lenders like people who pay on time, all the time. On the flip side, if your student loan debt is newer, it’s not as good for showing a long history of payments.

Stock Up

Another key to landing a new home while dealing with student loan debt is to save up for a nice down payment. If you can, save enough for a down payment of 20 percent or more. As USA Today notes, this will allow you to avoid paying for private mortgage insurance and show to lenders that you’re serious about the home buying process.

 

 

This article was originally posted on savvymoney.com 

 

The material provided on this page is for informational use only and is not intended for financial, tax or investment advice. VisionBank, PurposeBank, and/or its affiliates assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

Categories: Debt

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