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By Kim Buish
As a long time Realtor® one of the most common Real Estate questions that I’ve been asked over the years is “can I still buy a Houston Texas Home even if I have student loan debt?” and the answer to this question is yes but it also depends on your personal circumstances.
Debt-To-Income Ratio
According to many experts your debt-to-income ratio should not be more than 33%, although some lenders are willing to approve mortgage loans for individuals with a debt to income ratio that’s as high as 45%.
How do you figure out what your debt to income ratio is? Let’s say that your monthly income is around $6,000 per month, while your total debt payments equal about $2,000 per month, this is mean that your debt to income ratio would be about 33%.
FICO Score
Regardless of your current student loan debt, one of the most basic things that lenders are typically looking for before they approve mortgage loans is a good FICO score of at least 700 or higher although in the last two years it’s been more common for home buyers to get preapproved for mortgage loans with FICO scores as low as 620 especially if they applied for HUD or FHA loan.
Stable Payment History
Another important criteria that mortgage lenders are looking for when they determining if they should approve a buyer for a mortgage or not is a stable payment history meaning that you consistently make your payments on time over the last 12 to 24 months.
Stable Employment Record
Last of all, but most important mortgage lenders want to see that you have a stable employment record meaning that you worked in the same job for the last 12 months and you don’t plan on changing jobs anytime in the near future.
3 Ways to Tame Student Loan Debt
There are three ways to overcome a DTI difficulty: Reduce debt, increase income or decrease the target mortgage payment.
Reduce debt. Some lenders will remove an installment or closed-end loan, such as a car payment, from DTI if the loan will be paid off within 10 or fewer payments. Dacey says if a buyer pays off enough of a loan to reduce the balance to 10 or fewer payments, the DTI can benefit.
Reducing or paying off credit card debt can help, too, although the 10-month rule doesn't apply because a credit card is revolving or open-ended debt.
Another DTI improvement strategy is to pay off the student loans with a private loan, perhaps from a family member, at a lower interest rate or with a longer repayment term. The private loan must be disclosed to the lender.
Source- Bankrate.com
Mortgage Lenders Can Get Creative with Debt
Thankfully one of the main benefits of the current economy is that mortgage lenders have been able to loosen up their lending requirements and that’s made it easier for them to approve many people for mortgage loans.
If you currently do you have student loan debt some mortgage lenders may also be able to get creative with your student loan debt by encouraging you to do the following:
How to Fix or Improve Your Credit Score
One way to do this, on top of paying your bills on time, is to keep your credit card balances at or below the 30% threshold of the max available credit. This can potentially save a buyer thousands of dollars over the life of the loan. Higher credit scores would typically give you better interest rates.
Avoid quick fixes. Do not close existing credit accounts if you do not use them. Also, do not pay all of your card balances to zero at once, unless you can do this every month; any change can be viewed as a quick fix. (In general, you do not want to change the way you utilize your credit.) Quick fixes can negatively impair your credit. In the months leading up to a home purchase, keep paying your bills as you usually do; do not close any old credit lines and try to avoid opening up any new ones.
Maintain Healthy Debt – If you don’t have a substantial credit history, lenders might not have enough data to approve you for a loan. Maintaining healthy debt and being a responsible borrower can help you avoid being labeled as a “thin file”.
To obtain your credit score, you can request a FREE Annual Credit Report here. Make sure your credit report is accurate and up-to-date. If you have suspicious or dated transactions listed on your credit report, one option is to hire a credit repair agency to send legal verification letters on your behalf.
Source – Studentloanhero.com
Get Your Financial House in Order
Before applying for a mortgage loan to buy Houston Texas home make sure you do the following:
Search for a Houston Texas Home
To get started with searching for a Houston Texas home contact me, Kim Buish, Realtor® with Red Door Realty and Associates by calling me at (713) 819-1642 or connect with me online.
About Me
I may not be related to former President Bush, but I CAN help you whether you want to buy a WHITE HOUSE, a blue house or a yellow house. I live in Atascocita and have two children ages 26 and 20 and two beautiful grandaughters. I am very family oriented and believe that your home is one of the biggest investments you and your family will make. I want to be there to help you find the perfect home and get the most money for your current home! My areas of expertise are Atascocita, Humble, Kingwood, Huffman, and Crosby, but I am willing and able to help you buy or sell your home anywhere in Houston and the surrounding areas. I have been in Real Estate since 2004 and my first full year as a Realtor, I was awarded Texas/Louisiana Rookie of the Year. Since then I have received Top Producer awards each year 2005-2014. In 2011, I was selected by NextGen Realty Group as one of the Top 20 under 40 agents in HAR. I have received Top Production Realtor for 4th qtr 2011, 2nd qtr 2012 in HAR. Most recently I was listed as #12 Producing Agent in HAR for 2013 and #17 for 2014 out of over 24K agents in Houston. Check out the June 2015 edition of Texas Monthly Magazine where they announced the 5 Star Professionals in Texas where I won for the 3rd year in a row.
