As more millennials are preparing to buy a home, one issue is making it difficult for many — student loans.
The Project on Student Debt calculated that just about 7 in 10 college graduates in the Class of 2014 had student loan debt, and on average each student had about $29,000 in loans.
With mortgages often amounting to well over a hundred thousand dollars, many first-time home buyers may be asking whether they can even qualify for financing with their student debt.
So, is it possible to buy a home even with thousands of dollars in student loans? It depends.
What’s Your Debt-to-Income Ratio?
It all comes down to your debt-to-income ratio, or what percentage of your gross monthly income goes toward your total monthly mortgage payments.
Lenders recommend a debt-to-income ratio no greater than 36%, with no more than 28% of your monthly income going toward paying off your mortgage. As an example, someone who earns $50,000 in a year and has $1,500 in monthly debt payments would be right at the 36% recommendation.
So even if you are saddled with thousands of dollars in student loans, it is possible to obtain financing for a home if your debt-to-income ratio is right around that recommended ratio.
You Also Need to Consider Credit History
When home buyers apply for a mortgage, lenders look at whether they pay their bills on time and their employment history, for instance. If you have good credit history, that may further help you qualify for a mortgage.
You can always talk to a reputable lender about whether you can qualify for a mortgage with your student loan debt. Talk with us and we can help you get started with the mortgage pre-qualification process.
We Can Talk About Your Home Buying Plans
If you’re thinking of buying a home in the area, we can also recommend a reputable local mortgage lender so you can discuss the right mortgage for you, including interest rates and down payments. We even offer a free mortgage calculator on our website that can help you calculate monthly mortgage payments.
Contact us today to learn more about the home buying process at 734-761-3060 or email info@bouma.com and we can get started!