Buying a Home with Student Loan Debt

Can you buy a house if you have a student loan?

While many believe that the answer is no, the real answer is “probably.”

It all depends upon the expertise of your lender. That means the first question you need to ask of any lender is “Do you have experience in placing loans for buyers with student loans?”

Some will tell you “No – it can’t be done.” Keep asking until you find a loan originator who says “Yes.”

There’s no doubt, placing a home loan for a client who has student loans is a bit more challenging. The problem begins with the fact that there are many kinds of student loans:

  • Private loans – with a variety of loan terms and repayment plans
  • Federal loans – also with a variety of loan terms and repayment plans

Your loan repayment might be based on future income; you might have an interest-only plan; you may have exercised an option to defer payments. All these things must be taken into consideration.

To make things more confusing, each different loan type has its own method of reporting to the credit bureaus. Some report the balance due only. Some report the minimum payment requirement. Some show that a deferment is in effect.

Very few report the terms of the loan or the balance required to pay the loan in full.

Next consider the source of funds for your new home purchase.

Fannie Mae, Freddie Mac, FHA, and VA each have their own rules – and each has their own guidelines regarding how they view student loan debt.

An experienced Mortgage Originator understands how each of these entities operates and will work hard to match your specific situation to a loan program that will work for you. He or she will need copies of your Student Loan Statements and Your Loan Agreements, of course in addition to the routine documents regarding your income, employment, monthly debts, etc.

Becoming pre-approved for a mortgage loan before you begin to shop is always important. It’s doubly important if you have student loans, simply because it may take you a bit longer to locate a Loan Originator with the experience you need.

Once you have that approval, be sure to let your real estate agent know what kind of loan you will be getting, as that could affect which homes you should view. FHA and VA, for instance, have set guidelines regarding the home itself.

Should YOU look into purchasing a home before your student loans are paid off?

It all depends upon your circumstances. While I would never encourage anyone to go into debt over their heads, you might find that owning a home is less expensive than renting. Call me – let’s discuss what’s available in today’s market.

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