Has Student Loan Debt Put Your Home Purchase Out of Reach?
Fortunately, there are options.
If your student loan debt is causing you to postpone significant life events – like buying a home – you’re not alone. Nearly one third of those who haven’t yet purchased their first home point to their student loans as a reason for the delay.1
Student loan debt affects not only your ability to secure a mortgage, but also your mortgage rate. Your outstanding loans impact your debt-to-income ratio, which lenders use to determine how much mortgage debt you can assume. Your payment history also affects your credit score, which influences mortgage lending decisions.
Despite the challenges, it is possible to secure a mortgage while juggling student debt:
- Evaluate your repayment options. If you have federal loans, consider an income-driven plan that lowers your monthly payments.
- Explore refinancing your federal or private student loans to lower your monthly payments.
- Avoid loan forbearance, which may signal financial hardship.2 One notable exception is the Department of Education’s student loan payment pause which extends to January 31, 2022.3
If you’re among the many in the market for a home, but finding yourself challenged by student loan debt, learn more about securing a mortgage while managing your student loans.
1“The Impact of Student Loan Debt,” National Association of Realtors, September 2021.
2“Student debt can make buying a home feel impossible. Here are your options, CNBC, September 17, 2021: https://www.cnbc.com/2021/09/17/student-debt-is-a-main-obstacle-for-millennials-wanting-to-buy-a-house.html
3Current as of October 2021