Student loan debt is a hurdle facing many millennials as they become interested in becoming first-time homebuyers. But is it a hurdle that can’t be overcome? Here’s the skinny on student loan debt and mortgages.
Sometimes people seeking a mortgage with student loan debt in tow fear running into qualification issues regarding their debt to income ratio.
Debt-to-income (DTI) ratio is the percentage of income that you pay toward debts, including auto loans, mortgages, credit cards, child support, and of course – student loans. Some lenders look for a DTI of 36 percent or less, although there are specific programs that allow a higher DTI.
Here are a few ways to conquer DTI difficulties:
- Reducing your debt by removing a monthly payment or hastening the close of a loan within 10 payments will benefit your DTI.
- Paying off credit card debt will also help your DTI.
- Another strategy is to pay off student loan debt with a private loan at a lower interest rate or longer repayment term, which should then be disclosed to your lender.