Buying your first house is exciting, but if you’re like 44 million other Americans, you have student loan debt. Taking on a mortgage when you already have thousands of dollars in debt can feel daunting at best. Though your student loans may make it harder for you to qualify for a mortgage, it doesn’t mean it’s impossible. You just need to be smart about the process. Here’s what you need to know about trying to escape the rental market while repaying your loans.
Look at Your Debt-to-Income Ratio
Ultimately, lenders look at how much total debt you have and compare it against what you’re earning from your job and any side hustles you have. The number they get is your debt-to-income ratio. Ideally, you want that number to be on the low side. The more you pay down your student loans, the better your ratio will become.
Keep in mind that it’s not just your student debt that influences that number. It’s all of your outstanding debts. This includes your credit cards, car payments, and any other debts you might have. The more you pay those debts down, the better off you’ll be and the more likely you are to get approved for a mortgage. Even better, you’ll increase your credit score over time which will make it easier to get a low-interest home loan.
Get Pre-Approved Whenever Possible
Since outstanding student loan debt won’t necessarily keep you from buying your first house, you should get pre-approved for a loan before you start your house search. This will let you know how much home you’ll be able to afford and makes it easier for your real estate agent to help find properties that fit your needs and your budget. The best thing you can do is reach out to a lender and discuss your options as soon as you’re ready to start looking at homes.
It’s Okay to Take Your Time
If you’re not comfortable with the idea of taking on a mortgage because your student loan payments are high, don’t panic. It’s okay to take your time and work to pay down those loans for a few more months. The more you pay down, the better your credit score will become and the better loan terms you’ll qualify for.
Don’t Put Off Applying
If you have student loan debt but are still interested in buying your first house, don’t wait. Contact our team to discuss your options and let us help you find the right mortgage for your first home.