There are a lot of myths out there associated with student loans, and what you can and can’t do while you are paying them off. It is true that student loans do affect your credit, what is not true is that they prevent you from building credit, getting loans, or even from getting a mortgage. As with matters of credit, the experience of individuals can vary. Recently, US News and World Report covered new federal guidelines that may be putting more new homebuyers in homes, while they are carrying deferred student debt. These new guidelines are for FHA loans, which are popular for new homebuyers, these are federally issued loans, much like student loans. They allow for low down payments, which is good for people carrying those student loans.
However, lenders will still be taking into account your ratio of debt to income. As defined by the Consumer Financial Protection Bureau, your debt to income ratio is the total of your monthly debt payments divided by the total of your gross monthly income. If your level of debt to income is high, lenders feel that you will have difficulty meeting your mortgage payments. While you can get a mortgage with high debt versus your income, it may be a subprime loan, or it may have features that would not be allowed in what is called a “qualified mortgage.” There are still a lot of shady mortgage lenders out there, and while anyone can understand the desire to own your own home, qualified mortgages make it much more likely that you will be able to afford the payments.
As much as you may want a home of your own, it is a much better idea to start bringing your debt to income down. There are a few tips to doing this, but they will help you in the long run.
Finally, if you are having trouble managing your debts, saving money, and meeting your daily expenses, financial counseling can help you before you get in too deep. Learning how to manage your money, pay down debt, and still have a life is a skill that can help anyone at any age. Give us a call for free consultation and we will help to tame your debt.
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