Spring is here, which means new beginnings sprouting in your garden – and possibly a new home! If you’re beginning your search, you might be looking forward to weekend open houses and pleasant home buying weather. But, besides your must-haves for an excellent school district, walk-in closets, and shiplap walls – thank you, Joanna Gaines – do you know what it takes to make this major purchase?
It begins with qualifying for a mortgage loan. While it’s not as exciting as furniture shopping or housewarming parties, knowing how to qualify will make the process a whole lot more curb appealing.
Is your student loan debt stacking up against you?
You might be surprised how your student loan debt could affect the qualification process.
- Your credit score. Credit scores give loan providers a glimpse into how much debt you’re carrying and your repayment history. Significant student loan debt, or failed or late student loan payments each month could be damaging your credit score.
- Your down payment and savings. While some loan types require a low down payment, as well as cash for other out-of-pocket expenses like home inspections, application fees, closing costs and more. You might find it hard to put away any savings, let alone the amount needed for a home purchase, due to your monthly student loan payments. And, if you don’t come to the table with any savings, you may not get an approval.
- Your debt-to-income ratio. Lenders look at your current debt management compared to your income, and predict your ability to take on a new obligation, like a mortgage payment. If your student loan debt compares to the national average, which is around $40,000, your debt-to-income ratio might be a roadblock. Yep, even if you’re paying your bills on time and have a down payment.
Fives ways to qualify for your dream home!
Resolving these issues before falling in love with a house you won’t qualify for is well worth the work – we promise! Plus, we have some simple solutions to get you started.
- Review your credit report. Review yours for free with Equifax, Experian or TransUnion, and make sure there aren’t any discrepancies or inaccuracies that need to be reported or cleaned up – AKA, potential fraud or long forgotten, past due payments.
- Reduce your debt. During the home buying process, it’s helpful to not only reduce your debt but also to not take on any new debt, like buying a car or applying for another credit card.
- Save. Be sure to put anything you save towards your new home fund to cover all those bottom-line incidentals.
- Pay on time. Ensure your bills are all up-to-date, and you’re consistently making payments on time.
- Get pre-approved faster through My Education Solutions. MES offers an income-based repayment program that can help you lower your student loan debt and qualify for a new home loan or refinance. Enroll with MES and:
- Lower your monthly student loan payments by up to $400 on average, and increase your buying power by up to 30 percent – hello, bigger yard!
- Receive a customized pre-approval letter for mortgage lenders for conventional and VA loans.
- Bonus! A money-back guarantee pending your mortgage lender’s pre-approval means no pre-approval, no enrollment fee.
Carrying student loan debt doesn’t mean you’ll never have your “home sweet home.” Learn more about true student loan forgiveness and our no-risk program by calling 1-800-618-1170 or checking out our Student Loan Forgiveness Calculator to see if you qualify in a few easy steps.
Sources:
https://www.moneycrashers.com/getting-approved-mortgage-loan/
https://www.usa.gov/credit-reports
https://www.experian.com/blogs/ask-experian/what-is-the-average-student-loan-debt/
