As more millennials are preparing to buy a home, one issue is making it difficult for many — student loans. The Project on Student Debt calculated that just about 7 in 10 college graduates in the Class of 2014 had student loan debt, and on average each student had about $29,000 in loans. With mortgages often amounting to well over a hundred thousand dollars, many first-time home buyers may be asking whether they can even qualify for financing with their student debt. So, is it possible to buy a home even with thousands of dollars in student loans? It depends.
What’s Your Debt-to-Income Ratio?
It all comes down to your debt-to-income ratio, or what percentage of your gross monthly income goes toward your total monthly mortgage payments. Lenders recommend a debt-to-income ratio no greater than 36%, with no more than 28% of your monthly income going toward paying off your mortgage. As an example, someone who earns $50,000 in a year and has $1,500 in monthly debt payments would be right at the 36% recommendation.
So even if you are saddled with thousands of dollars in student loans, it is possible to obtain financing for a home if your debt-to-income ratio is right around that recommended ratio.
You Also Need to Consider Credit History
When home buyers apply for a mortgage, lenders look at whether they pay their bills on time and their employment history, for instance. If you have good credit history, that may further help you qualify for a mortgage. You can always talk to a reputable lender about whether you can qualify for a mortgage with your student loan debt.
If you’re thinking of selling and have questions on the market or if you’re wondering what steps you should take to prep your home for sale, contact Wilson Realty Group at (919)378-1974! Our expert Listing Specialists are here for you!