If you’re one of the 44 million Americans with student loan debt, buying a home may seem like a distant dream. However, some sound financial planning and an understanding of what lenders are looking for can put homeownership within reach.

Start With Understanding Your Situation

It’s not uncommon to feel overwhelmed by student loan debt. Even borrowers that understand the details of their repayment plan—like the total amount due, length of the loan and interest rate—may not understand the full picture until after graduation when they enter the workforce and start repayment.

Before you begin the process of shopping for a mortgage, determine where you stand with your student loans. While the total amount of your loans plays a role, other factors, such as monthly payment amount, can have an even bigger impact. If you are still in the original repayment plan, you may have options that will increase your mortgage eligibility.

Payments Take Priority

Rather than total debt, your monthly repayment obligations are going to be one of the primary drivers of a lender’s willingness to loan you money. If buying a home is near the top of your to-do list, you’ll want to focus on reducing those debt payments.

Thankfully, student loans often offer a path to do just that. If you’re currently paying back multiple student loans, a consolidation plan could lower your interest rate and your payment. Extending the loan term could also be a viable way to minimize your monthly costs.

Another option may be signing up for an Income Driven Repayment plan. These calculate a monthly payment based on your income and can even offer loan forgiveness for any balance remaining after a minimum number of payments.

While minimizing your monthly payments could mean it takes longer to pay back your loans, it also reduces your critical Debt-to-Income Ratio. This comparison of your monthly debts to your monthly income, combined with your credit history, determines your borrowing power.

Move Up With Money Down

If lowering your debt obligations isn’t enough to get you into the home you want, it’s time to start saving. While paying extra toward your school loans is often a smart financial strategy, it won’t impact your monthly payments. If buying a home is the goal, putting that money toward a substantial down payment instead could mean a mortgage payment that won’t explode your debt-to-income ratio.  

Every financial situation is unique, so consider talking with a professional about the debt strategies that will work best for you. And, once you’re ready to make the leap to homeownership, speak with a mortgage expert at OpenMortgage.com.

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