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Don’t let Student Loans Keep You Away From Homeownership

July 9, 2018 6:56 pm
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Student Loans and Home Ownership

Having student loan debt does not automatically preclude you from qualifying for a home loan. There’s a range of home loan programs that vary in requirements. Depending on your goals, you more than likely qualify for at least one of the home purchase products even if you have a student loan.

As with any financing, your Debt-to-Income (DTI) Ratio is a significant factor in qualifying for a loan. Certain home loan programs weigh student loan debt differently when calculating your DTI. Your LH Lending Loan Officer can review the best options for your situation.

What is DTI?

A debt income ratio (often abbreviated DTI) is the percentage of a consumer’s monthly gross income that goes toward paying debts. (DTIs often cover more than just debts; they can include principal, taxes, fees, and insurance premiums as well.)

The two main kinds of DTI are expressed as a pair using the notation x/y (for example, 28/36).

  • The first DTI, known as the front-end ratio, indicates the percentage of income that goes toward housing costs, which for renters is the rent amount and for homeowners is PITI (mortgage principal and interest, mortgage insurance premium [when applicable], hazard insurance premium, property taxes, and homeowners’ association dues [when applicable]).

  • The second DTI, known as the back-end ratio, indicates the percentage of income that goes toward paying all recurring debt payments, including those covered by the first DTI, and other debts such as credit card payments, car loan payments, student loan payments, child support payments, alimony payments, and legal judgments.

Will I be able to qualify?

If you have a credit score of 640 or higher; plus your income, employment and assets (e.g. Checking, Savings, etc.) can be verified with documentation—then usually you’re in a good position to qualify for a home loan.

applying for a home loan with a low credit score?

Your loan officer can help advise you how to reach a good credit standing and inform you of any loan programs you may qualify for. Some  loan programs allow scores as low as 600 and 580. Speak with your loan officer today.

There home loan programs with varying qualifications and features such as low to zero minimum down payment:


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