Planning for First-Time Homebuyers with Student Loans
Student loan debt can feel like a barrier to homeownership, but it doesn't have to be.
Today, many first-time homebuyers are making their dreams a reality while managing student loan payments. According to the National Association of Realtors®, 75% of younger buyers (25-33) and 44% of older buyers (34-43) are first-time buyers.
With the right approach, you can achieve your goal of owning a home while responsibly managing your student loan debt.
Reduce Student Debt in Your DTI for a Home Loan
Lenders consider your debt-to-income (DTI) ratio when you apply for a home loan. And many lenders prefer a DTI of 36% or lower. Student debt can increase this percentage, but there are ways to lower it:
- Graduated Payment Plan: Temporarily reduces student loan payments. Note that this isn't an option for FHA loans.
- Deferment: Pauses or reduces monthly payments for a set time.
- Consolidation: Combines student loans into one, potentially lowering payments by extending the repayment term. However, this may transfer your loans to a private lender, affecting certain protections.
Lowering Your DTI for Homeownership
- FHA Loans: If your student loan is deferred, 2% of that debt is included in your DTI.
- Reduce Other Debt: Focus on paying off credit cards and other debts. Some lenders may exclude debts paid off in 10 months or less from your DTI.
- Budget: Create and stick to a budget to lower your DTI and save money.
Student loans don't have to block your path to homeownership. Our licensed loan officers can help guide you through the process. Use our mortgage calculator to estimate monthly loan costs and start budgeting today.
Stay one step ahead