Have a student debt? Here is How You Can Still Qualify for a Mortgage

first-time-buyers-or-home-moversdreamstime_41192402015/05/first-time-buyers-or-home-moversdreamstime_4119240-300x206.jpgTennessee’s college graduates carry a student debt of nearly $21,000 on average after they leave their campuses, according to some reports. Though the average student loan is lower in Tennessee compared to many other states, it’s still affecting our young population’s ability to fulfill their dream of homeownership after studies.
Nashville particularly boasts of a big population of students as the city is undoubtedly a great destination for pursuing quality education. Many of these college graduates want to launch their career in the city due to phenomenal growth in the job sector recently. However, when the time comes for them to buying a home, they feel financially burdened due to their student loans.
Many of these first-time home buyers have no idea how they can increase their chances of availing a mortgage while they are paying down their student loan. Here are some tricks that can help these prospective buyers financially plan their purchase in a better way:
Know which repayment plan suits you the best
If you are a prospective home buyer looking to finance your purchase with a mortgage, then you must already know that a lender will approve your home loan after evaluating your debt-to-income ratio.
If your payment towards loans including a mortgage, credit cards and student debts is higher than 43% of your monthly income, then you may find it difficult to avail a mortgage. To lower other debts when applying for a mortgage, you would need to pay down your credit card debts, automobile loans and student debts.
If student debt is one of your primary concerns, then you need to bring down the amount of monthly payments towards your student loan. It means that you need to switch to a repayment plan that suits your situation.
If you’ve taken on a Federal Direct Loans and Federal Family Education Loans, including the Parent PLUS Loan and Stafford Loans, then you are in luck. There are many repayment options available to choose from.
If you opted for a standard repayment plan, you can switch to a graduated repayment plan or an extended repayment plan. Under the graduated repayment plan, the loan pay-off period remains the same, generally 10 years, but the loan payments will depend on your income. If you start with a lower-paying job, but you know that the income will increase gradually, then under the graduated repayment plan, you pay lower student loan payments initially, but the installment will increase every two year as your income grows. Under the extended repayment plan, you can extend the amortization period to 25 years.
If you have taken out a private loan, then you should speak with your lender about their individual repayment options.
Avoid being delinquent
If you’ve taken out a federal loan, you would be delinquent on your payment if you didn’t pay your installment for 60 days, but missing a single installment on a private loan will reflect on your credit report.
So always try to avoid being late on your student loan payments. It’s the key to maintaining a good credit score.