When it comes time to purchase a home of your own, student loan debt shouldn’t hold you back. With many former students in debt for often tens of thousands of dollars, purchasing a home may seem out of their reach.
We’re here to tell you that it is not.
With the right information and financial responsibility, purchasing a home with student debt is possible.
You Need Good Credit
Just like for any loans you take out, you will need good credit. Check your credit score regularly from the three leading credit reporting companies, TransUnion, Equifax, and Experian, and report any errors. If your credit score is lower than you’d like, work to improve it by:
- Making all monthly payments on time
- Getting a secured credit card
- Keeping old debts on your credit report to show that you paid them off on time, every time.
Choose The Right Mortgage Program
When you have student loan debt, choosing the right mortgage program is instrumental in being able to balance both loans. There are many programs available for first-time homebuyers with student debt, such as:
- No money down mortgages
- FHA loan
- VA loan if you are a veteran
- Fannie Mae HomeReady™ mortgage and other similar programs
Before you commit to any one program, consult with a trusted financial advisor and your lender. They will help guide you through the process and help you find the best option for your needs.
Reduce Your Debt-To-Income Ratio
If you have other debts, such as a car loan or credit card, work to pay off some of that debt and reduce your debt-to-income ratio (DTI). DTI shows how much of your gross income goes to debt payments each month. If your ratio is over 49%, the chances are that you will not get approved for a home loan until your debts are lowered.