Doing Double Duty

How to secure a mortgage while dealing with student loan debt

Your debt-to-income ratio is one factor mortgage lenders consider when deciding on loan approval and rates. So if you’re struggling with student loan debt — which stands at $1.6 trillion total — it can be tricky securing a loan for a new home. Don’t be deterred. Try following these tips for securing a new home even while juggling student loan debt.

Get Ready

Before applying for a mortgage, get your finances in order. If you have other debts, pay them down as much as possible. You want your overall DTI (debt-to-income ratio) to be less than 35 percent. Make sure you’re paying bills on time and have a credit report — with a credit score as high as possible — ready to show to your lender.

Know the Time Frame

Your student loan debt isn’t all bad. In fact, if your loans are quite old, they will actually help you with your credit score. That’s because if you’ve been paying them ontime, the older debt shows lenders you have a solid payment history. Lenders like people who pay on time, all the time. On the flip side, if your student loan debt is newer, it’s not as good for showing a long history of payments.

Stock Up

Another key to landing a new home while dealing with student loan debt is to save up for a nice down payment. If you can, save enough for a down payment of 20 percent or more. As USA Today notes, this will allow you to avoid paying for private mortgage insurance and show to lenders that you’re serious about the home buying process.

Chris O'Shea

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