The Karlin Law Firm LLP - Business Law Attorney

Providing quality legal services to statewide and national clients in ADA defense, Personal Injury, business and real estate for more than 35 years

Providing quality legal services to statewide and national clients in ADA defense, Personal Injury, business and real estate for more than 35 years

408-944-5626

Email Us

Buying a home when paying down student loans

There are many ways in which having student loan debt can impact a person’s ability to buy a home. For instance, each time a student loan payment is made, the money going to a lender can’t be used for a down payment. Furthermore, the debt itself will likely count toward a person’s debt-to-income ratio. That ratio is one metric lenders look at when making a home loan decision.

If an individual misses a student loan payment, it could have negative consequences for that person’s credit score. However, those with average credit may be able to increase their score by making timely payments. Those who are looking to buy a home may believe that they need a down payment of 20 percent. The good news for prospective home buyers is that this isn’t always the case. Individuals who receive an FHA or VA loan could put down less than that to qualify.

A government loan may also be ideal for those who have a debt-to-income ratio of more than 36 percent. This is because it may be possible to qualify with a DTI of 50 percent. To lower a DTI, prospective homeowners should look to pay down student loan, credit card and auto loan balances as quickly as possible. Ideally, a person will choose to pay down the balance with the highest interest rate first.

Buying a residential property may help a person obtain stability in their lives. However, those who are in debt may need to create a plan to pay those debts off before buying a home. An attorney or a financial professional may be able to help a person figure out how to do so. In some cases, these professionals may talk about what types of debts lenders look at when calculating a DTI.

FindLaw Network