Should Student Loans Be Paid Off Before Buying a Home?

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For many first-time homebuyers, student loans can seem like a major obstacle to the home buying process. The truth is, about 44.7 million people in the United States have student loan debt, adding up to about $1.7 trillion. If student loans disqualified people from purchasing homes, there would be far fewer homeowners in this country.

  • When buying a house, does student loan debt affect eligibility? When you’re applying for a mortgage, all of your debt will affect your eligibility. Lenders evaluate your debt-to-income (DTI) ratio when determining whether you qualify, because that’s the measure of how much of your monthly income is needed to pay your debts. Therefore, student loans affect your eligibility since they’re part of that monthly debt.
  • Are student loans an obstacle when home buying? If you have a stable income and good credit, student loans should not be much of a problem. In fact, if you’re currently paying rent and making student loan payments, the chances are good that you’ll be able to afford to continue to pay your student loans while making a monthly mortgage payment.
  • Which other factors determine a person’s eligibility for a mortgage loan? Lenders look at your overall financial picture. As mentioned, this includes your debt-to-income ratio. They also consider your credit score and the amount of money you’re able to use as a down payment. Cleaning up your credit score, saving for a down payment, and reducing your DTI are all smart moves before you apply for a mortgage.
  • Should student loans be paid off before buying a home? Paying off student loans is a worthy goal, and it would certainly reduce your monthly debt. It’s not realistic for everyone though. You can reduce your payments by requesting a longer loan repayment period or a graduated repayment plan. You can also reduce your DTI by focusing on debt that may be more manageable, like your credit cards.
  • There are several mortgage programs available to borrowers with student debt. These include FHA loans, the Fannie Mae HomeReady mortgage, and VA loans. Some of these programs allow options like 100 percent financing or low-down payments. Working with an experienced mortgage broker is a good way to determine which type of home financing is right for you.

If you’re looking for home financing, First Coast Mortgage Funding is here to help. Committed to helping people in the First Coast region buy and refinance residential properties, we specialize in every kind of property, from single-family homes to condominiums, townhouses, and manufactured homes. Over 70 years of combined experience has made us independent mortgage experts, and we offer creative solutions to help borrowers overcome roadblocks when trying to secure a loan. Our goal is to provide home loans to our clients at the lowest interest rates and the best possible service. Contact us through our website or call 904.770.5000 for more information.