Getting Your First Mortgage With Student Loan Debt

Thinking of getting your first mortgage? All kinds of statistics show that millennials are buying more homes and living their best lives. If only you didn’t have all this debt, like student loan payments, holding you back from buying your dream house now. But what if you could buy a house even with unpaid student debt? Is it possible in this economic climate or just a dream?

Let’s discuss the scenario and determine what options you might have.

Student Loans Aren’t Necessarily Bad Debt

While mortgage loans, especially your first one, can be exciting, sometimes it's a bit overwhelming. This is even more true if you have student loans.

Student debt is not the same death toll as bad debt. No credits or debits at all is a sign of unstable credit history. But taking on a loan, and paying it off on time, can improve credit score.

Lenders aren’t going to automatically disqualify a student who is paying back educational loans, even if it’s a long repayment period. What’s important to the lender is your overall debt and your debt-to-income ratio.

If you are making good money and regularly paying on your student loan and still have enough left over to pay for a mortgage, that’s an ideal scenario for some lenders.

Many online lenders like SoFi private student loans are willing to work with first-time buyers, even if traditional banks aren’t interested.

What Other Factors Matter for Getting Your First Mortgage?

Getting your first mortgage can be daunting, especially if you do not meet the lender’s strict criteria. A lender’s criteria are not always related to income either.

Depending on the mortgage price, the company might need to see your bank statements to monitor your expenses and assets. Documentation will be required to prove all claims, and the lender may want a home appraisal.

Even if you have the money to make regular payments, try to avoid late or missed payments. Once payment is listed as late or delinquent, it will negatively affect your credit score.

If the debt-to-income ratio is too imbalanced, you might consider refinancing your most considerable debts, even if it’s a previous student loan amount.

For example, if you can transfer all or even part of your total debt to a credit card with a lower APR, you can directly decrease your expenses and keep a relatively high monthly gross.

Don’t assume all opportunity is lost just because you have several bills. You can always adjust your finances around a priority house mortgage and then find ways to make extra money to improve the debt-to-income ratio.

Save for a Larger Down Payment

Getting your first mortgage might be harder if you don't have a large down payment saved up.

But even if you’re having a hard time coming up with the standard 20%, you can still look for opportunities from organizations like the Federal Housing Administration. For example, some FHA-exclusive loans are available to qualifying homeowners for as little as 3.5% down if you have a reasonably good credit score.

You can also reach out to other government organizations, such as the Department of Veterans Affairs, the U.S. Department of Agriculture, and other programs made explicitly for first-time homeowners.

To qualify for these programs, you may need to meet certain income requirements or live in the house for a few years before applying.

Your First Home Purchase is Worth It

Getting your first mortgage is a big project. Sometimes saving and calculating a budget takes years. It’s worth researching, especially if you’re taking a loan out for the first time.

But when you realize that you can finish school and get a house in the peak years of your life, it will all be worth it!

Do you think buying a house with $200k in student loans would be difficult?