Buying a Home with Student Loan Debt? Here’s What You Need to Know

More than 44 millions Americans are paying off student loan debt—especially people between the ages of 25 to 34. But that hasn’t slowed down home-buying dreams. In fact, interest in home-buying has shot up in the 18-35 age group a whopping fourteen percent since last year!

But wait: how exactly can you manage getting a loan for a home when you’re already paying off debt? Don’t worry—having student loan debt doesn’t disqualify you from home buying! Here are the top ways to prepare for buying a home when you have student loan debt.

Keep Your Credit Score in the Green

A person holding out a credit card.

Making payments is probably not your favorite thing to do, but no matter what, make sure you’re paying them on time. It’s an easy way to boost or maintain your credit score! Missing payments, on the other hand, spells major trouble and can sink your score more than you think.

A good credit score is a huge factor in deciding whether or not you can get the home loan you need. Luckily, having things like student loans and credit cards actually works in your favor, because it shows that you can manage different forms of debt. Just make sure those payments are on time!

Set a Clear Budget

A woman writing in a planner.

Before you even start talking to lenders to get pre-approved, it might help if you have a clear idea of what you can handle. Make your own detailed monthly budget that includes things like:

  • student loan payments
  • mortgage payments
  • utilities
  • phone/internet bill
  • groceries

And so on. Your budget doesn’t have to be incredibly detailed, but going into the process prepared helps you keep realistic expectations and will give you some peace of mind in advance.

Reduce Your Debt-to-Income Ratio

A dollar bill.

A debt-to-income ratio is pretty much what it sounds like: the amount of money you owe compared to the amount of money you make. Mortgage lenders will be using this ratio to help calculate what sort of payments you can afford, and the qualifying ratio for income to debt falls around 28:36.

While you can still get a loan if you’re above that number, it might be in your best interest to up your monthly income or refinance your debts for a more affordable monthly payment.

Make Sure You’re Pre-Approved

People meeting.

We’ve been talking about pre-approval a lot, but maybe you aren’t totally sure what it is. Essentially, pre-approval happens when the buyer completes an official mortgage application, then the lender reviews the application and pre-approves you for a specific mortgage amount.

This process is typically required before an agent works with you, and it also helps show a seller that you can put your money where your mouth is. The lender will need quite a few documents from you to complete the pre-approval, so be sure you have everything on-hand.

Consider Assistance Programs

A woman at a laptop.

There are plenty of local, state, and national assistance programs that can help you come up with a little extra money for a down payment, even if you have student loan debt.

The FHA (Federal Housing Authority) and VA (Veterans Affairs) are known for their helpful down payment assistance programs. The FHA might be your best bet, especially in Fort Worth, and their loans can require as little as a 3.5% down payment.

If you’re curious about your state and local options, give us a call, and we’ll help you break things down.

Your Fort Worth Home-Buying Experts

Having student loan debt doesn’t disqualify you from buying a home, and there are plenty of ways to balance the two. If you have more questions about buying a Fort Worth home, just give the team at Wilco Realtors a call.

Whether it’s buying, selling, or exploring the area, we’re here to help!

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