What Prospective Home Buyers Need to Know About Student Loan Debt
Owning a home has always been considered a common way Americans build wealth, but homeownership can be a distant dream for those holding a substantial amount of student loan debt. Of people ages 22-35 with student debt, 83% of them blame their inability to purchase a home on their student debt loans. It’s a big issue, and it’s only growing with every increase of the cost of a college education. There are three ways student loan debt can affect your chances of getting a mortgage loan…
Debt-to-Income Ratio – This ratio shows how much of your gross monthly income your monthly debts eat up, and student loan debt is factored into this. So, if your student loan monthly payment is high enough, it can take you out of the running for a mortgage loan.
Deferment Won’t Help – And in some cases, a deferment of payment might actually harm your chances of securing a loan. If your lender doesn’t know what the monthly student loan payment amount will be when the deferment ends, they must count 1% of the applicant’s total student loan debt as part of their monthly debt, which may end up being higher than actually taking the loan out of deferment and paying on it.
Missing Student Loan Payments – As we all know, late payments can make dents in your credit, and a strong FICO score is one of the biggest factors in securing a loan. If your credit dips much below 620, it could be really tough to get that loan.