Learning About Finance and Money
3 Tips For Improving The Chances Of Securing A Home Loan With Student Loan Debts
Jordy De Pijper
In 2015, one in eight Americans had student loan debts. If you are one of them, there is a possibility that your chances of securing a mortgage loan will be impacted by your debt. However, there are steps you can take to reduce the impact that the loans have on your creditworthiness and improve your chances to getting a mortgage loan.
Consolidate Your Student Loans
Multiple student loans can look bleak on your credit report. To lessen the impact of those loans, consolidate them into one. Consolidation not only looks better, but it makes it easier to keep up with the loans. Instead of making several payments, you can make one payment and it is distributed to all of your lenders.
If you already have loan consolidation in place, but it is not being properly reported on your credit report, contact your lenders and ensure that the information is updated.
Defer Your Loans
If you are already behind on your student loans, you can request a deferment. When you defer the payments, the loan is brought out of default. During the deferment period, you can make alternative arrangements to pay off the loan.
One option is to change your repayment agreement. If possible, lengthen the terms to allow more time for repayment. You also have the added benefit of reducing your debt-to-income ratio, which is key to your success in securing a home loan.
Make Your Payments
As you know, making your student loan payments is important. However, understanding just how important it is can help improve your chances of getting a home loan.
Lenders have strict policies when it comes to how federal debt is treated when assessing home loan applications. Since your student loan is considered to be a federal debt, missing just one payment or being late could have a big impact on whether or not a lender is willing to approve your loan. In the year leading up to applying for a home loan, you need to ensure that your student loans are paid on time. When you do pay off the loan, ensure that your credit report is updated to reflect it.
Talk to a loan counselor early in the process about other steps you can take to improve your chances of being approved for a home loan. The counselor can help assess your credit and determine if there are any other debts you need to be concerned with, too.
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