You’ve worked hard to get your degree, and now it’s time to reap the rewards. You’re ready to make that big purchase: a home! That’s great, but you may wonder whether buying a house with $100K student loans is possible.
The answer is yes, but it depends on several factors. In this guide, we’ll look at some of these factors and explain how they affect your ability to buy a house with student loans.
Is Buying A House With $100K Student Loans Possible?
The answer is yes, buying a house with $100K student loans is possible. In fact, more people are doing this than ever before. The key is understanding what your options are and taking advantage of them.
It’s no secret that buying a home has become more complicated in recent years due to the housing crisis and subsequent recession that followed it. However, times have changed, and the market has recovered from those dark days.
And with it comes new opportunities for buyers who can navigate the complexities of today’s real estate landscape. Buying a house should be within reach if you have a good credit score and make timely payments on student loans and other monthly debts.
Should You Purchase A House With Student Loan Debt?
Depending on your situation, the answer is yes and no. If you have a good credit score and have a low debt to income ratio, then yes. Your ability to get authorized for a mortgage should be relatively easy.
In fact, if your student loans are in deferment or forbearance and not accruing interest. Then those payments will help lower your monthly required housing payment (mortgage plus taxes and private mortgage insurance). However, if you have a poor credit score or significant student loan debt relative to income level, then no. The lender will require additional documentation that can be difficult or impossible to come by while still paying off student loans.
This may be proof of steady employment or recent tax returns showing an income level at least three times greater than monthly housing costs. Therefore, the best thing to do is always save for a house when you’re planning to buy one.
The Federal Student Loans Benefits?
Federal student loans are the most typical type of student loan. They have flexible repayment options and numerous repayment plans. Federal student loans are also eligible for various forgiveness programs where you can have your outstanding student loan balance forgiven after a specific time.
Factors That Affect Your Ability To Buy A House With Student Loan Debt
Suppose you’re considering student loans and are looking to buy a house. In that case, many factors will impact your ability to do so. Below are some of the more important ones:
Debt To Income Ratio
The debt to income ratio is the money you have left over after paying all your bills. The lender uses this number to determine your ability to repay a loan. This includes student loan debt, credit card debt, car payments, etc.
The conventional wisdom is that the debt to income ratio should be around 36%, but some lenders allow up to 43% of the debt to income ratio. Lenders want to see enough income for you to pay for house payments and other expenses. This includes property taxes and utilities with some money left over for savings or spending money.
Suppose you have too much debt with no extra income leftover (i.e., debt to income ratio is too high). In that case, lenders will not lend you money because they don’t think you can afford the mortgage payments on top of everything else in your budget.
Your Credit Card Debt
If you have credit card debt, it can affect your ability to buy a home. The amount of money you owe on your credit cards is a factor in calculating your debt-to-income ratio. This can negatively affect your ability to qualify for a mortgage loan.
Generally speaking, the more debt, the less likely lenders will approve your financing request. This is in addition to the impact that having just one high-interest credit card may have on qualifying for loans. This is because mortgage lenders are concerned about their risk exposure should they invest with someone with what they consider too much personal liability.
Your Monthly Debt Payments
One of the most significant factors in your ability when buying a house with $100k student loans is your monthly debt payments. This monthly debt payment includes any amounts you owe on credit cards or other loans and your student loans.
Your monthly debt payments should be less than 36% of your gross income if you want to qualify for a mortgage loan. For example, if you have $2,000 per month in student loan payments and $1,200 per month in other debts (credit card balances), your total monthly debt payment would be $3,200.
If this amount is more than 36% of your gross monthly income ($3200/$10,000 = 30%), then it’s unlikely that you could qualify for a mortgage based on these numbers alone.
Gross Monthly Income
The amount you make before taxes and additional deductions are taken from your monthly paycheck is called gross monthly income. If you’re like most people, this number will be one of the biggest factors in determining whether or not you can afford a house. And if so, how much home you can afford.
The reason for this is simple: A mortgage lender wants to know that they’ll get their money back when it’s time for your mortgage to be paid off (or refinanced). So mortgage lenders demand proof that there are enough funds available after all bills are paid each month. This includes student loan debt payments to cover the cost of buying a home every month from then on out until it’s paid in full.
Ability To Afford Monthly Student Loan Payments
As a general rule, the less you spend on your average student loan debt payments each month, the more money you’ll have left over to put toward a down payment. If you’re considering buying a house with student loan debt. Therefore it’s important to note that your ability to afford a monthly student loan payment affects your ability to buy a home.
Your ability to afford monthly student loan debt payments also impacts how much interest you’ll pay over time. In other words, if you can’t afford the monthly student loan payment on your student loan today, it makes sense that you’d be paying more in interest over time. This can affect everything from when and whether or not someone chooses credit counseling or bankruptcy.
Things To Do When Buying A House With $100k Student Loans
Buying a house with $100K student loan payment is no easy feat. However, it’s possible to make this dream a reality. The steps to buying a home with $100K student loan are:
Ensure That Your Credit Report Is Accurate
When you buy a house with $100K student loans, it’s essential to ensure that your credit report is accurate. The last thing you want is to be denied a mortgage because of something that isn’t actually true.
You should review your credit report at least once every three months and more often if there is something on it that doesn’t seem right. Contact the company where the error occurred and dispute it. If that doesn’t work, ask for a correction from the reporting bureau and any other sources (like collection agencies) who may have gotten hold of false information about you.
Lower Your Debt To Income Ratio
The debt-to-income ratio is critical in determining whether you are approved for a mortgage. A low mortgage and excellent credit history will help you get the best possible interest rate. So it’s crucial to maintain good financial health before applying for a loan.
Lenders may be wary of approving your application if your application shows that you have $100K of private student loans. When looking at your debt to income ratio, mortgage lenders compare all monthly debts with income. If the debt to income ratio gets too high. Then they will question how much you can pay toward other expenses and still afford your monthly payments.
In addition, they might think that paying off large amounts of student debt will prevent them from having enough cash flow available each month. This is in case something unexpected happens like emergency repairs or unexpected medical bills arising while buying a house with $100K student loans.
Lower Your Monthly Debt Payments
When buying a house with student loans, looking at all your debt and determining which debts have the highest interest rate is essential. You can then focus on paying off that debt first.
This will help lower your monthly payment or keep them the same as if you were paying off everything else. You may also want to consider refinancing some or all of these loans to offer a lower interest rate and make repaying them easier.
For example, if you have high-interest credit card balances from college. Then paying those off first will free up money every month so you can put it toward buying a house. That way, when it comes time for closing costs on your mortgage, those funds won’t be necessary because they’ve already been paid off.
Consider FHA Loan
When buying a house with $100K in student loans, it’s essential to consider the different mortgage options available such as the Federal Housing Administration loan. An FHA loan is an excellent option for people with significant student loan debt because they have lower down payments, interest rates, and monthly payments.
Because FHA loans allow student loan borrowers to make a smaller down payment on their home purchase than conventional mortgages. They can be helpful if you’ve already taken out a student loan and need to save money to buy a home.
FHA loan lenders also have better rates than conventional mortgage lenders regarding your interest rate. This is another basis why an FHA loan is such an appealing option. Additionally, you can be approved for a loan with high debt-to-income ratio with FHA loans. The maximum debt to income ratio with FHA loans is 57%.
Consider First-Time Home Buyer Programs
First-time home buyers can take advantage of many different financing and assistance programs. The U.S. Department of Housing and Urban Development (HUD) offers some programs. In contrast, others are provided by lenders or other organizations.
Some examples of first-time home buyer programs include:
- Down payment assistance loans provide up to 3% of the purchase price to help you with your down payment costs. These loans require repayment after 30 years but do not accrue interest during this period.
- Student loan debt reimbursements pay off all or part of your student loan if you buy a new home within three years after graduation. This benefit will continue every year until your student debt is paid off as long as you stay current on your monthly payments.
Yes, buying a house with student loans is possible. However, it will be challenging to do so. You’ll need a good credit score, a high income, and a low debt-to-income ratio to qualify for your mortgage. If you can get approved for the loan and have the money for the down payment and closing costs, congratulations. You’ve successfully purchased your first home with a 100K student loan.
If you’re overwhelmed by all these things before buying your first home but want help getting started as quickly as possible, look no further than our HOMES by ARDOR. They’re here to guide anyone through the process of buying homes while still carrying student loan debt or other types of debt that they might not be able to pay off right away.
Kris Reid is the CEO of Ardor SEO, a company that helps real estate professionals get more leads and customers to predictably grow their business.
Over the years, Kris acquired extensive knowledge of SEO and its practical applications in various industries, with the main focus on real estate.
In 2021 Ardor launched the Icons of Real Estate Podcast to share proven strategies from the top producing icon agents with the real estate community.
After obtaining the real estate license in 2022, Kris joined eXp Realty and launched Homes by Ardor, the platform that was built to be the fastest way to buy or sell a house. Homes by Ardor also provides leads for its partner companies and realtors.