A housing market is a competitive place, both for sellers and buyers. If you’re a first-time homebuyer, the process and expense of buying a home are big challenges to face on your own. Adding other factors into the mix, like having student loan debt, might make the process very challenging.

While you can buy a Charlotte, NC home with student loan debt, if you’re trying to do so, know that a large amount of debt can negatively impact you. Before jumping into a mortgage application, take a look at your current budget, expenses, and previous debts to see if you can handle taking on a mortgage while paying for your student loan balance.

However, you aren’t exactly disqualified from applying for a mortgage even if you have a large amount of debt. Discuss with your lender to identify what you need to do to become a homeowner, either immediately or in the near future.


Does Student Debt Affect Mortgage?

With mortgage rates increasing, it might be more and more tempting for you to buy a house now before it gets higher. Especially if you’re renting now, it’s a logical step to think that owning a home can save you money in the long run. If you have student loan debt, though, you’re likely concerned about whether it will affect your qualification for a mortgage or not.

A student debt likely affects a mortgage as an unpaid student loan is still a debt. Buying a home while still having student loan debt is more challenging than if you’re debt-free. However, it doesn’t make it impossible.

In fact, obtaining a mortgage, even with a student loan debt, can be a smart decision. All you will need is a bit of planning, research, and a great real estate agent in Charlotte, NC, and you’re all set.

When you apply for a mortgage, lenders will check your credit and assess every monthly obligation you pay, including student loans. This is to determine if you can manage the additional payment of a mortgage. The outcome depends on your circumstances, as the lenders decide if you qualify for the loan or not, plus what interest rate you will most likely be paying.

Because of this process, you should consider things like your debt-to-income ratio and overall credit score. Both could be negatively affected once you have student loan debt and a mortgage on your hands. Buying a home is possible, but adding a mortgage to any existing debt can cause trouble. So, you need to know if you can manage all of your payment obligations and if they match your income.

If you qualify under the lender’s standards, you will be given an interest rate, and you can start planning what to do from there. Just remember that even if having a student loan doesn’t automatically disqualify you from getting a mortgage, there are still chances that it can.


Can You Buy a Home If You Owe Student Loans?

It is still possible to buy a home when you have student debt. As a potential homebuyer, you can choose from various mortgage loans that suit you best. 

There is a conventional mortgage from private lenders like banks and relevant financial organizations. There is also an FHA loan backed by the Federal Housing Administration, which is fit for people who have limited savings. 

Before considering these options, you should understand how your debt-to-income ratio and credit score can affect your ability to qualify for a mortgage.

Debt-To-Income Ratio

The debt-to-income ratio is the total amount of your monthly debt payments divided by your monthly gross income. Lenders will often use this ratio to determine how much income is left after you’ve paid off other obligations. They will then be able to see if you’ll be able to afford mortgage payments. Having a high debt-to-income ratio is very risky.

At a maximum, your debt-to-income ratio should be 43% or less to be able to qualify for a mortgage. If your student loan debt still has a large amount unpaid, then these minimum monthly payments may be what pushes your debt-to-income ratio to pass the 43% mark. Going beyond that percentage makes it more difficult to attain a loan.

Credit Score

Credit scores are important factors that financial institutions take into account when deciding if you're qualified to be lent any money. This one is much easier to maintain than your debt-to-income ratio, even if you have a student loan debt hanging over you. Unless you’re missing payments, a student loan debt usually will not affect your credit score at all.

Boosting your credit score is relatively easy. Just make sure that you apply each of these in your lifestyle and budgeting:

  • Pay bills on schedule. Making payments on time gives your credit score a good boost. If you can pay fully and on time, then much better, as this can give you a solid reputation in the financial department.

  • Avoid closing old accounts. Some people tend to think that closing credit card accounts is the best option to choose to maintain or fix your credit score, but it might do the opposite. If you have an old account with a good credit score, it can boost your overall scoring. The longer and older your credit history and accounts, then the more they will be able to contribute to your credit score.

  • Manage how you use your credit. Credit utilization is the ratio of your credit balances to any available credit lines. In these cases, you should try to use as little of your available credit as possible, only when necessary. The lesser, the better.

You can keep track of your credit score yourself. It is good to constantly keep tabs on it before you settle on finally buying a home. Building a good credit score when you have student loan debt really makes you a more probable candidate for mortgage qualification.

If you aren’t sure of your debt-to-income ratio or whether you have a good credit score, then don’t feel pressured to buy a home as soon as you can. The falling mortgage rates seem attractive, but that doesn’t mean you should run out and jump into homeownership as soon as possible.


Final Thoughts

Handling both student loan payments and mortgage payments can be more complex than it sounds, which is why you should assess yourself first before making big decisions like buying a home. However, if you are confident that you’re ready, you’ll need help and guidance to lead you down the right path.

Nancy Braun has been in the real estate industry for almost two decades now, where she now stands as an expert in the field. Since founding Showcase Realty, she has been one of the best real estate agents in Charlotte, NC, with sharpened skills and expertise throughout the years. Find out more about Nancy Braun and Showcase Realty at https://showcaserealty.net.


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Charlotte NC Real Estate, Homes For Sale In Charlotte NC, showcase realty


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