How to Get a Mortgage with Student Loans

Once out of college and starting a career, adults often start looking for a place to settle down. However, they may encounter difficulty qualifying for a home loan if they have excessive student loan debt. If you are in a similar situation, here is what you can do to increase your chances for approval and get a mortgage with student loans. 

What Do Lenders Look For?

Mortgage lenders start by looking at your credit score, which may not even be affected by student loans. To boost your credit score, make sure you pay your bills on time and don’t over-spend. Manage your credit wisely, and use more than one type. Having a credit card and student loans shows you’re capable of handling finances. During the mortgage process, keep old credit accounts open, especially ones in good standing. 

The Effects of Your Debt-to-Income Ratio

After your credit score and income have been assessed, lenders will calculate your debt-to-income ratio, or DTI. This is where student loans can impact your standing. Your DTI shows the percentage of your monthly income that goes toward paying debts. Your monthly recurring payments, such as credit cards, rent, and student loans, are divided by your pre-taxed monthly income to get your percentage. 

The higher your DTI, the harder it’ll be to get a mortgage. Most lenders will work with clients who have a DTI of 50% or lower, depending on what type of loan you take out. Paying off your student loans or other debts can help lower a high DTI ratio and qualify you for more loan programs.

Qualifying for a Mortgage with Student Loans

If you have solid, reliable income and make consistent payments, it’s possible to qualify for a mortgage before paying off your student loans — even if your DTI is over 50%. Loans backed by the Federal Housing Administration will take a DTI of up to 57%, in some cases. Veterans and active duty personnel can also qualify for a VA loan that can be even more flexible with your DTI ratio. 

Get a Mortgage with Butler Mortgage

No matter your budgetary means, Butler Mortgage is here to help you navigate the mortgage process. For more than 25 years, we’ve worked with potential homeowners throughout the states of Florida and Georgia to find their perfect loan solution. Get started today by calling 407-931-3800 or filling out our free online consultation form.

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