Getting A Mortgage Despite Student Loans

When you went to college, getting a home probably wasn’t the first thing on your mind. The reality, however, is that most student loans end up taking 10 to 20 years to pay off- with research from Citizens Financial Group suggesting that 60 percent of student debt borrows don’t expect to pay off their loans until they are in their 40s. That means when you are ready to purchase your first home, student loans are likely to be a factor in determining whether or not your home ownership dream comes true.

How much of a factor? According to a 2017 article by Daniel Bortz for Realtor.com, 41% of college graduates with student loans put off buying a house because of their student loan debt. And yet, it is possible to qualify for a mortgage while you are still stuck with student loan payments, particularly if you follow sound strategic planning.   

Tips for Getting a Mortgage Despite Student Loans

Student Loan Consolidation – If you have $10,000 or more in student loans you may be able to consolidate those loans at a lower rate. This can help lower your monthly payments and you can take those savings to begin building a down payment on a house
 
Avoid Credit Card Debt – Try to limit credit card purchases, or if you do make purchases, pay off the balances every month. If you do carry credit card balances look for opportunities to transfer those balances to cards with lower interest rates.
 
Set Financial Goals – Setting goals can help you stay disciplined and focused while limiting unnecessary spending.
 
Pay Your Bills… On Time – Paying your bills on time establishes a behavior pattern that lenders like to see when it comes time for apply for a mortgage. It also keeps your credit score higher which can help you get better interest rates.
 
Eliminate Debt – Try to pay off as much of your debt as possible before you start the process of seriously looking for a home. It’s’ also a good idea to not take out any new debt, including applying for new credit cards when you are in the house-hunting process.
 
A Realistic Budget - Make sure your budget is realistic. You want to be sure you can manage both mortgage payments and student loan payments in addition to other debt and living expenses. 

How Much Student Loan Debt is Too Much for Mortgage Approval?

While there is no absolute rule, in general, your student loan payments should not exceed 8% of your income when you are ready to apply for a mortgage. It’s also worth noting that 8% is ideally the highest percent for all your non-mortgage payments, which means students loans plus any other debt, such as car payments, credit card payments, etc.


JBT can provide additional tips as well as assistance in answering your questions about Mortgages and Student Loans.