Buying a house always feels like a milestone, and it’s a high priority young aspiring people aim at. However, plenty of us are hindered from making this next step by our other financial obligations, like student debt.
While student debt might seem like a shackle that prevents you from making major financial decisions, it needn’t stop you from buying a place of your own. As long as you have a stable source of income and a decent credit score, you can look into being a homeowner even while paying off your student loans.
How student loans affect your mortgage applications
One of the first steps to owning a house is applying for a mortgage. While student debt will definitely be factored into your application, it’s not a complete deterrent to you getting your dream house in Denver.
The biggest way your application will be affected is through your debt-to-income ratio (DTI). Your student loans will be included as a monthly due. However, difficulties can be resolved by adjusting your payment scheme for your student loans. Reducing your monthly payouts can increase your qualified mortgage loan amount.
If you have other monthly payments, like your credit card, then you might need to recalibrate your spending for a few months to better adjust your DTI. Don’t forget that timely payments increase your credit score, which is another important factor in your mortgage application.
Consider different loan types
It’s difficult to apply for a mortgage with a DTI higher than 50%, but it is still possible to get approved. All you need to do is apply for different types of loans.
It’s worth noting that there are different mortgages that work well with student loans, like the FHA loan and the Fannie Mae HomeReady mortgage. With options like 100% financing and low down payments, it’s worth considering applying for these loans.
Lastly, some of these mortgages are granted on a case-to-case basis. Gather some local information around the area you plan to buy a house in, and you might find out about the different financing options available for you.
Should I pay off my student loans before buying a house?
You have plenty of options when it comes to buying a house while managing student debt, but it’s always important to honestly assess your financial capabilities before committing to getting that mortgage.
It’s inadvisable to try to buy a house with a bad credit score or too high of a debt-to-income ratio. Buying a house takes careful preparation of your finances, so make sure you can pay your debts in a timely manner. Also, an emergency fund is a necessity, so make sure you have a sum saved up first before buying a house.
However, if your credit is in good shape and you feel confident about your income being able to sustain all your monthly payments, then you may be in a position to own your own home.
If you’re thinking about buying a house in Boulder, or other areas in Denver, then contact us at Noel & Martinez Team. With our combined expertise in the Colorado real estate market, we can guarantee you the best deals in the shortest amount of time. We can also help you with managing your student debt while still finding the house that’s right for you.
