How Your Student Loan Debt Influences Your Home Buying Options
Forbes Magazine calls student loan debt in the United States the $1.5 Trillion Dollar Crisis. Over 44 million people carry at least some student debt making it the second largest consumer debt category behind mortgages. In fact, consumers average more student loan debt than both credit card debt and car loans.

The numbers are so large they are a bit mind-numbing. To bring them down to a more personal level, each member of the class of 2016 is expected to have over $37,000 in student loan debt. What is perhaps more concerning is that almost 11% of these loans are 90 days or more in arrears. This is all to say that those who are carrying significant amounts of student debt are not alone.

This student loan debt however, has real life consequences. It drains money from the economy and negatively impacts quality of life. It has emotional, mental and physical ramifications. It will also likely affect your ability and options when it comes to buying a home.

Can your student loan debt prevent you from buying a home? Is there anything you can do with your student loan debt prior to seeking a mortgage? Are there any options to include some student loan debt in a future mortgage? Let's take a look at how student loan debt can impact your options when buying a home.

Can Student Loans Prevent Me from Getting a Mortgage?

No, and yes. Having a student loan in and of itself should not prevent you from qualifying for a mortgage, but the effect of those loans on your personal finances can. For example, mortgage companies look at a borrower's income to debt ratio. This provides a look at total debts vs your total income, giving lenders a gauge on your ability to pay back a loan. If one has significant student loans, that debt to income ratio is higher, negatively impacting the ability to qualify for a loan or resulting in a higher mortgage rate. In addition, another important factor is a borrower's credit score. If a person stays current with student loans it can improve their credit score. Missing or late payments will lower it.

So, while having a student loan may not prevent you from getting a mortgage, its impact on your personal finances, income to debt ratio and credit score could.

What Should I do with my Student Loan Prior to Getting a Mortgage?

It is in your best interest to keep student loan payments up-to-date. You could also consider refinancing student loans at terms that may be more attractive. Keep in mind whatever you do with student loans prior to seeking a mortgage may impact your ability to secure that mortgage. You'll want to talk with a financial professional to discuss your options.

What Can I Do to Increase My Mortgage Options with Student Loans?

You may have more control than you think. Here are specific ways you can improve the quality of your home loan options.

  • Pay attention to improving your credit rating
  • Keep your debt to income ratio low
  • Don't take on any new significant debt
  • Save for a larger down payment
  • Increase your income
  • Pay off student loans faster through refinancing or making additional payments
  • Talk with a financial professional about your situation and your goals

Keep in mind, if you have student debt, you are not alone. Every day, consumers just like you are still able to qualify for mortgages using a variety of innovative financial products. If you are interested in taking the next step, you should contact a licensed mortgage professional.

How A Professional Can Help

There are more options and opportunities available to those seeking a mortgage now than ever. This includes those who are carrying student loan debt. The key is finding the solution that is best for your particular situation. The last thing you want, after all, is to make your financial situation worse.

Research your options and choose the path best suited for you. What is important is that you don't let student loans block your path to your dream of home ownership.