4 Steps to Afford a Home Mortgage with Student Loan Debt

Find Out How You Can Afford A Mortgage with Student
Loan Debt

If you graduated from college in the last few years and want to buy a home, taking out a mortgage with student loan debt seems like an impossible goal. However, a fresh approach to budgeting and spending can often open up new possibilities for home ownership even before your student loans are paid off.

Owning a home and having a mortgage with student loan debt is a challenge no matter what—but with thorough planning and discipline, it is quite possible. Here are 4 steps to prepare yourself for a mortgage with student loan debt:

1. Manage Your Debt-to-Income Ratio

To qualify for a home loan, the amount you pay out every month for loans must be low enough to leave room for mortgage payments. The magic number when it comes to your debt-to-income ratio is 43%.

Get out your calculator and see where you currently stand in relation to that magic 43% number. For instance, if you currently earn $3,000 per month, you have up to $1,290 available for all debts, including potential mortgage payments. Depending on which region of the country you live in, a “starter” home could easily require payments of less than $1,000 per month. In a situation like this, it would be possible to afford a mortgage with student loan debt on top.

2. Reduce Monthly Payments

Reducing consumer debt is an important step in qualifying for a home loan, especially if your student loan payments are high. The key to affording a mortgage with student loan debt is to prioritize. Lowering loan cost and number of loans can go a long way.

To reduce your debt load, look for areas where you can avoid taking out a loan, such as choosing to pay cash for a used car rather than taking out a brand new car loan. Also, pay off all credit card debt before beginning to seriously hunt for a house.

3. Adjust Your Student Loan

If you’re in a career track where you can reasonably expect your income to increase in the future, your school loan originator may be willing to set up a new plan with lower payments for a few years. This can help you qualify for a mortgage with student loan debt. If you are still in college, try to stick with federal school loans, because they offer more flexible payment options through the life of the loan.

4. Maintain Good Credit

Regardless of how many bills you have to pay, affordable home ownership depends on building a good credit history. Pay every bill on time, and make sure your credit history is accurate.

You can get a free credit report once a year from this federal website, and if you find any errors you should contact each credit reporting bureau. Remember that good credit is difficult to build and easy to lose. Taking out a mortgage with student loan debt will be, unwise, impossible, or both if your credit is questionable.

Choosing home ownership while you are paying off student loans may require some prioritizing and self-discipline. In the long run, there is no other financial choice that will build your lifetime wealth as reliably as purchasing a home.

Blue Water Mortgage Corporation is here to provide you with expert advice—especially to first-time homebuyers. If you have any questions about affording a mortgage with student loan debt, or any other home ownership questions, we encourage you to contact one of our mortgage professionals.

Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.