HOMEBUYING MYTH

I CAN'T BUY A HOME WHILE I'M PAYING OFF STUDENT LOANS

More than 44 million Americans have student loan debt, and many people assume that their student loans will prohibit them from becoming a homeowner, but that’s just not true. Although every situation is different, the mere fact that you have student loans is not going to disqualify you from obtaining a mortgage!

Student Loans do count towards your Debt-to-Income ratio, which one factor that lenders will use to determine loan eligibility. It’s less about the total amount of outstanding loans that you have than it is about your monthly payment. The mortgage company will want to make sure that you can handle both your loan repayments and your monthly mortgage payments.

If you have a steady income, pay your bills on time and have savings, you may be in a position to purchase a home even with student loan debt.

UNDERSTANDING DEBT-TO-INCOME RATIO

When lenders consider any type of debt, they’ll look at your monthly debt-to-income ratio (DTI). Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. In other words, lenders add up payments for things like credit card debt, an auto loan payment, and your monthly student loan payment and combine that with your future mortgage payment. Then they divide that number by your gross monthly income, which is how much money you earn before taxes. The lower your DTI the better your mortgage terms will be. Most lenders require a 40% or less DTI.

LOAN STATUS MATTERS

Ideally you're current on your payments. But if you're not, a deferred loan is much better than a defaulted one.

DEFERRED LOANS:
If you’ve deferred your student loans, you may be unable to qualify for certain loans. Don’t forget to take into account what your future estimated payments will impact your monthly debt.

DEFAULTED LOANS:
Defaulting on your loans severely impacts your credit score. The lower your score, the harder it is to get a mortgage and a favorable interest rate. If you’ve defaulted on your loans, you may want to work on building your credit back up before applying for a mortgage.

OTHER THINGS TO CONSIDER

DEAL WITH OTHER DEBT

Your student loans are just one piece of your debt to income ratio. If you have smaller debt that you can pay off such as credit cards, auto loans, etc., your DTI will improve. And eventually it will increase your credit score as well.

Your credit card limit/available credit appears on your report and using less available credit can increase your credit score. And please, please, please, do not take on any new debt while you're considering applying for a mortgage. Seriously. Like not even that store credit card that's going to get you 10% off your order. It's not worth risking your loan application!

RESTRUCTURE YOUR LOAN(S)

You can refinance both federal and private student loans - combining them into one private loan with a lower interest rate & lower monthly payment. You may be able to lower your payment even more by extending the term of your loan. However, your total repayment costs will increase due to paying more interest over time.

If you opt to refi your student loans, do so at least 6 months before you apply for a mortgage, and make all payments on time. This will help your credit score bounce back from the new line of credit used to refinance. Make sure to take the money that you save on your monthly student loan payments and save it for your down payment or closing costs!

If you have multiple federal student loans, you can consolidate your loans into one & decrease your monthly payments by extending the term of your loan. As with refinancing, this could cost you more over the life of the loan, so proceed with that in mind.

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LET'S DO THIS!

There are so many options for different loan types, terms, and even assistance programs to help with things like down payment and closing costs. Generally speaking, the stronger your credit and the higher your down payment, the more flexibility you have in your home search and funding. However, even if your credit isn’t perfect and you’re nowhere near having close to 20%, don’t count yourself out.

The first step is getting your thoughts and wants organized and educating yourself. And that’s pretty much my specialty.

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It’s never too early to connect with me to figure out your home buying game plan. Thinking of buying in 6 months, 1 year, 3 years? It’s time to sit down for a consultation so that you can get on track & stay on track until you’re ready for that set of keys.

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Hi I'm Meg & I'm not your mother's REALTOR.

As a former wedding planner, I have a unique skill set that I use to help home buyers navigate both the logistics and the emotions of buying a home. I don't think of myself as a salesperson - I'm your real estate coach, your logistical coordinator, your house hunting BFF, and your cheerleader.

I don't want to sell you a house, I want to help you manifest homeownership.

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MEGHAN RAMSAY