Buying A House When You Have Student Loan Debt

 Here are 8 action steps you can take right now:


1. Focussing on your credit score is important - Real estate Kitchener


FICO credit scores are among the most frequently used credit scores, and range from 350-800 (the higher, the better). A consumer with a credit score of 750 or higher is considered to have excellent credit, while a consumer with a credit score below 600 is considered to have poor credit.


To qualify for a mortgage and get a low mortgage rate, your credit score matters.


Each credit bureau collects information on your credit history and develops a credit score that lenders use to assess your riskiness as a borrower. If you find an error, you should report it to the credit bureau immediately so that it can be corrected.


2. Managing your debt-to-income ratio 


Your debt-to-income ratio is evaluated  when making credit decisions, which could impact the interest rate you receive.


A debt-to-income ratio is your monthly debt payments as a percentage of your monthly income. Lenders usually focus on this ratio to determine whether you have enough excess cash to cover your living expenses plus your debt obligations.


Since a debt-to-income ratio has two components (debt and income), the best way to lower your debt-to-income ratio is to repay your existing debt; or earn more income; even maybe do both.


3. Do Pay attention to your payments- Real estate Kitchener


The lenders obviously want to lend to financially responsible borrowers.



Your payment history is one of the largest components of your credit score. 


Ensure on-time payments is necessary, set up autopay for all your accounts so the funds are directly debited each month.


FICO scores are weighted more heavily by recent payments so your future matters more than your past.


It will be better if you -

Pay off the balance if you have a delinquent payment

Don't skip any payments

Make all payments on time


4. Getting pre-approved for a mortgage- 


Get pre-approved with a lender first so that you'll know the home you can afford.


To get pre-approved,the lenders will look at your income, assets, credit profile and employment, among other documents.


5. Maintain credit utilization low


Lenders also evaluate your credit card utilization, or your monthly credit card spending as a percentage of your credit limit.


Ideally, your credit utilization should be less than 30%. If you can keep it less than 10%, even better.


Here are some ways to manage your credit card utilization:


set up automatic balance alerts to monitor credit utilization

ask your lender to raise your credit limit (this may involve a hard credit pull so check with your lender first)

pay off your balance multiple times a month to reduce your credit utilization


6. Maybe Look for down payment assistance


There are various types of down payment assistance, even if you have student loans.


The ways are- 


FHA loans - federal loan through the Federal Housing Authority

USDA loans - zero down mortgages for rural and suburban homeowners

VA loans - if military service


7. Consolidate credit card debt with a personal loan- Real estate Kitchener


Option 1: pay off your credit card balance before applying for a mortgage.


Option 2: if that's not possible, consolidate your credit card debt into a single personal loan at a lower interest rate than your current credit card interest rate.


A personal loan therefore can save you interest expense over the repayment term, which is typically 3-7 years depending on your lender.


A personal loan also can improve your credit score. Credit cards, however, are revolving loans and have no fixed repayment term. Therefore, swapping credit card debt for a personal loan, can lower your credit utilization and also diversify your debt types.


8. Refinance your student loans today


When lenders look at your debt-to-income ratio, they are also looking at your monthly student loan payments.


Student loan refinance lenders are available who offer interest rates as low as 2.50% - 3.00%, which is substantially lower than federal student loans and in-school private loan interest rates.


Each lender has its own eligibility requirements and underwriting criteria, which may include your credit profile, minimum income, debt-to-income and monthly free cash flow.


Student loan refinancing works with federal student loans, private student loans or both.


If you make these 8 moves, you'll be able to manage your student loans better and still buy your dream home

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