How Much Debt Is TOO Much?

Have you ever heard someone say. “I really wish I could buy a home, but just this one thing is holding me back.” We’ve heard it a thousand times! On a regular basis one of the biggest reasons people think they can’t is because they have Student Loans. Maybe you can relate?

I get it, I really do.

Student loan debt is becoming one of the biggest factors PREVENTING people from buying a home. 83% of non-homeowners say that student loan debt is preventing them from becoming a homeowner!

When we shared this with them, they changed their minds!

While student loan debt can make it more difficult to be approved for a home loan it is NOT impossible! One of the biggest issues when qualifying for a home loan with student debt is how much that debt affects your DTI(Debt-To-Income) Ratio.

Your DTI Ratio shows a lender how much of your monthly income goes towards your recurring MONTHLY DEBTS. A lender wants to make sure that you can not only handle the monthly obligations you have, but that you could add on a monthly mortgage payment.

DTI = Total MONTHLY Debt Payments
                 GROSS Monthly Income

Because of this a mortgage lender cares more about your MINIMUM MONTHLY PAYMENT  for your student loan debt payment rather than the TOTAL AMOUNT OF THE LOAN. For example, even if you have $100,000 in student loan debt, but your monthly payment is $150, the $150 will be used to calculate your back end DTI Ratio rather than the total $100,000 due.

Even if your monthly student loan debt payment is high a lender may be able to help you figure out your NEXT STEPS such as refinancing or consolidating your student loans in order to have a LOWER monthly payment or utilizing several first time homebuyer programs which allow for a HIGHER DTI Ratio and can even provide DOWN PAYMENT assistance.

Did we change your mind?
If you’d like to learn more about how buying a home with student loan debt is possible COMMENT DOWN BELOW!
Justice Roberts Loan Officer

Justice Roberts

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