As long time Realtors® at Fred Sed Realty one of the most common questions that we’ve been asked over the years is “can I buy a home even with student loan debt?” and the answer to this question is it depends.
In this post we will share with you what to expect from a lender if you want to buy a home while you have student loan debt.
What Lenders Are Looking For
During the process of buying a home lenders want to see that you have the following:
- Low debt to income ratio – Should not be more than 33% of your income.
- Good FICO score.
- Solid payment history.
- Stable employment record.
Although it’s possible to buy a home these days even if you have a credit score under 700, and a down payment under 20%, the reality is that debt-to-income ratio still matters because a lender wants to make sure that you have the ability to repay your mortgage loan.
Are Your Student Loan Payments Deferred?
Even though you’ve been repaying your student loan faithfully since you graduated college you might want to consider deferring your student loan payments for 12 months (if possible) because some lenders will not count your student loan payment as part of your debt-to-income ratio if you’ve deferred your student loans for 12 months.
It’s also possible for you to lower your debt-to-income ratio even more because some lenders will be willing to move your debt around.
For example: if you have a car loan and there’s just 10 payments left on that loan the lender may not count it as part of your DTI or if you just bought a vehicle and one spouse doesn’t work you could refinance that vehicle in your spouse’s name that way one spouse has less DTI than the other spouse and may be able to easily qualify for a mortgage loan.
Contact Fred Sed Realty
To get started with searching for a home in Southern California or to speak with one of our lenders contact Fred Sed Realty today by calling us at (800) 322-4643.