Property Manager MA: Mortgage with Student Debts
Those people who have massive student debts are less likely to get a mortgage. This is because the amount of debt they have will reduce the money they will be likely to have for a down payment for a mortgage. Student debts do affect your debt to income ratio as well as credit score. These are two important factors which help you get a mortgage. This post takes a look at how this matters.
Your Debt-to-Income Ratio
Lenders will always take your debt-to-income ratio into account before they will consider you for a loan. This is how they will know whether you can afford your monthly loan payments or not. They will do this by adding up all your monthly debt payments (including loans, student loans, credit card loans etc ) as well as your mortgage payment and then divide them by your income (before taxes). They will not consider you for a loan if your debt-to-income ratio exceeds 43 percent.
Property Manager MA: Manage your loans
The good thing about federal student loans is that they have some flexibility. One is unable to do anything about car loans and credit card payments. So if the person with student loans switches the loan repayment program from standard to graduate then that would allow your debt-to-income payment to be around 43 percent and allow you to get a mortgage.
However it is important to remember that the graduate plan works on the assumption that your salary will increase in the next few years. The student loan payments grow higher along with the increments. So make sure that you are able to afford a mortgage that you can afford if your student loans increase. In the event that your salary is not going to increase any time soon, then check the income based plans.
Elevate your credit score
So if you pay your student loans on time, then the likelihood of getting a mortgage is good. Lenders don’t want a credit risk on their hands. They would prefer someone who pays students loans on time. The credit score will also determine your interest rate. So if you have a high score, you will be getting a low interest rate. Those people who have a lower score will have to pay a higher rate or probably not even qualify.
It is important to remember that private loans are marked as defaulted even if you miss one payment. In contrast federal student loans are reported to the credit bureaus only after there are 60 days of no payment.
We hope you liked our guide “Property Manager MA: Mortgage with Student Debts”.