If you’re a new buyer and looking to qualify for your first home now or in the near future, you could be wondering if any outstanding school debts will impact your chances of getting a home loan.
Important factors considered during the mortgage application process are your monthly income and your monthly debt payments when calculating the amount of money you can afford to borrow. Your debt payments can include student loans, car payments, or credit card bills. This is called your debt to income ratio.
Payment Histories Matter
Your payment history also plays a role in the loan approval process. Your payment history includes all your credit lines along with any student debt. If you pay your student loans on time, it can have a positive effect on your overall credit score. Late payments can have a negative impact on your credit score. Checking your credit report allows you to see what your lenders report about you.
Keeping Debt Under Control
You can help increase the chances of getting a home loan by paying all your bills on time. Timely payments have a positive impact on your score. You can also help your chances of receiving a loan by reducing the load of your monthly payments. This can be done by paying down debts, such as credit cards, or paying off student loans. The more of your debt you can reduce, the better your debt-to-income ratio will fare.
Consider Ways of Increasing Your Income
Increasing your income can and paying down your school loans can help. Perhaps you can consider income from a part-time or side job or savings. Another option could be to find a co-signer who’s willing to sign on the dotted line with you. A co-signer could show the lender that between the two of you, you will be able to afford the loan and make the payments. As with any credit application, your lender will have to approve the co-signer’s qualifications as well.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.