Mortgage Application Tips: Does Your Existing Student Debt Affect Your Chances At A Home Loan?

Two of the biggest and most major expenses one person can have in his lifetime would have to be home mortgage and college loan. In fact, out of all Americans who go to college, about 60% of them use college loans. Also, a large fraction of all these student loaners still pay off their loans even at their 30s. Surprisingly enough, there are also people who are still paying their student debt even at their 50s.

This issue is one of the reasons why millennials take longer time before they can buy homes. In fact, as of 2010, the average age of first time home buyers is 30 years old. Three years later, only about 28% of buyers were born from 1980 to early 00's.

The Effect Of Student Debt On Getting A Home Mortgage

Although having student debts may look like a really bad thing for the ones who have it, it doesn't totally hinder your chances to get a home loan. Yes your student debt is one factor lenders will consider, but the element that plays a bigger role in this situation is your ability to pay your debts.

In the end, it's all about your debt to income ratio. Lenders would want to know if you can afford gaining additional debt. If your income is high enough to cater to all your bills, then there's nothing to worry about when it comes to your student debt.

If you want to own a house sooner, just make on time payments and try to make payments that are more than your minimum amount. This way, your debt to income ratio becomes more attractive to lenders, leading you nearer to your dream of home ownership.

The loan type you are applying for also differs in the way they get affected by outstanding student debt. If applying for a government loan, student loan can be excluded, if the borrower can prove that the payment of his/her debt can be deferred for a year. But if the loan we are talking about is a jumbo or conventional loan, the outstanding student debt may affect the application more significantly. There are loan programs that are priced higher if the borrowers DTI is higher than usual.