In 2016 it’s not uncommon for home buyers in Southern California to have student loan debt especially if they just recently graduated from college.
The big question many people with student loan debt have is “can I buy a home with student loan debt?” and the answer to this question is it depends on a variety of factors including your debt-to-income ratio.
What Is Debt-To-Income Ratio?
Debt-to-income or DTI as it’s called by lenders is your total monthly debt payments divided by your monthly income.
For example: let’s say that your total debt payments every month including your student loan debt equals $2,000 while your income equals $6,000, this means that your debt-to-income ratio is 33 percent.
Lenders are searching for borrowers with a DTI of 36% or less so if your debt-to-income ratio is more than 36% it might be considered high by some lenders since every lender wants to make sure that a borrower has the ability to repay their mortgage loan especially after the last mortgage crisis.
Defer Your Student Loan Payments?
One common tactic that many lenders advise homebuyers with student loan debt to take is to defer their student loan payments because some lenders may be able to not count student loan debt against the borrower if their payments are deferred and this will ultimately lower their debt-to-income ratio and enable them to get into a home.
Before choosing this strategy make sure that you consult with a mortgage lender then confirm that you will have the income to continue making your student loan payments once they resume especially after you’ve bought a home.
Before Meeting With a Lender Do This
Before meeting with a mortgage lender or advisor for the first time make sure you come prepared and bring the following:
- Your pay stubs or W2 forms.
- Bills for credit cards and other debts.
- Documentation of payments for your rent, student loans, auto loan, utilities and other bills.
- Gift letters for money that you may have received from parents or relatives for a down payment on a home.
Contact Fred Sed Realty
To learn more about buying a home with student loan debt or to speak with our team of mortgage lenders contact Fred Sed Realty today by calling us at (800) 322-4643 or connect with us online.