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Can Students Buy a Home with Crushing Student Loan Debt?


The student loan debt crisis has crippled millions of Americans. With so much debt looming over you, the thought of making a major purchase such as a home may seem absurd. Luckily, if you are determined to purchase a home, there are ways to do so, even with high student loan debt. The mortgage professionals at Rex Homes have provided some additional information on their blog here: https://blog.rexhomes.com/buying-home-student-loan-debt/

Improve Your Debt-to-Income Ratio

The mortgage application process is determined, in large part, by what is known as your “debt-to-income ratio”. When you’re a new graduate, it seems like there is little you can do to improve this ratio. After all, you’re unlikely to be offered an extremely high-paying job right out of the gate (keeping your income low), which will prevent you from making significant payments on your loans (which will keep your debt high). 

This vicious circle may make it seem like there is no possibility for escape and that you will be prevented from buying your dream home for years to come. However, there are small steps you can take to improve your debt-to-income ratio such as:

  • Paying down credit card debt.
  • Consolidating loans.

These actions may not seem like much, but they can go a long way towards improving your debt-to-income ratio and increasing your chances of receiving a favorable mortgage rate for your home.

Use the Services Offered by Fannie Mae

Fannie Mae, or the Federal National Mortgage Association, is the government organization to turn to with all homebuying-related questions. In particular, Fannie Mae has outlined three ways in which those with high student loan debt can overcome their difficulties and purchase a home:

  1. Consider “Student Loan Cash-Out Refinance”. This option enables you to simultaneously refinance your mortgage to a more manageable rate as you pay off your student loans.
  2. Turn to Family and Friends for Help Paying Off Debt. If you have family or friends that can assist you by paying your school loans, car loans, and credit card debt, this debt will not be factored into your home loan application. This can leave you in a much better situation when the time comes to apply for your mortgage.
  3. Report Student Loan Payment Information to Lenders. Using “student debt payment calculation” permits lenders to consider student loan payments with regards to your credit score. This option leaves you in a more favorable position during the mortgage application process.

Have Someone Co-sign Your Loan

A co-signer might be an excellent option for you, depending on your unique financial situation. However, remember that co-signers are difficult to remove from loans and the process is often expensive. So if you decide to pursue a relationship with a cosigner, just know that there will be extra costs down the road.

Final Thoughts

If you’ve thought through all of your options, weighed the risks and the benefits, and decided that you are going to buy a home despite your student loan debt; consider working with an experienced mortgage professional. These experts can help you navigate the homebuying process and will make everything easier for you. Contact your mortgage professionals today, they are waiting to take your call.

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