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Can Student Loans Stop Me From Getting a Mortgage?

Student loan debt is becoming a bigger part of financial discussions in California. With the favorable mortgage rates, you may wonder if you can qualify for a mortgage if you have student loans. At the Law Office of Terrence Fantauzzi, I work with clients to help lower student loan payments.

Owning a home is a big part of the American dream. It’s a place to put down roots and raise a family. Pasadena mortgage rates are at an all-time low. If you have a steady job, decent credit and a solid grasp of your finances, it may feel like the right time to take the plunge.

Debt-to-Income Ratio

Lenders may look at the amount of your monthly payment obligations, which include student loans. To determine your debt-to-income ratio, a financial institution looks at your current monthly debt and adds in your expected mortgage amount. This number is then divided by your gross monthly income, which is the amount you earn before deductions and taxes.

To better understand whether you’ll qualify for a Rancho Cucamonga mortgage, you can do a basic debt calculation before approaching a lender. This includes credit card debt, student loans, car loans, mortgages, personal loans, and other payments that you routinely pay each month. It does not include expenses such as groceries and utilities. 

For our example, let’s say our monthly required payments look like this:

Car = $300

Student loans = $500

Credit cards = $500

Expected mortgage payment = $1,400

Monthly debt payments = $2,700


If our gross monthly income is $6,000, the debt-to-income ratio is about 45%. Most lenders look for the debt-to-income ratio to be below 43%. Ideally, it should be under 36%.

Student Loan Payments

Student loans affect your ability to get a mortgage the same way other debt does, such as credit cards and loans. The debt-to-income ratio in our example is likely too high to qualify for a mortgage.

If you’ve been paying the amount assigned by your student loan servicer when your loans came due six months after you finished with school, you are on their standard payment plan. The fixed, monthly are often higher than in other repayment options, as you are paying off the loan in the shortest amount of time, which can help you pay less interest, saving you money over the life of the loan.


Remember! It’s the total amount of your monthly payments that matters in the calculation, not the amount of debt you have.

However, changing your student loan repayment plan to an income-driven or extended option could considerably lower your monthly payments. In our example, we are only over the maximum target ratio by 2%. If we can reduce the monthly student loan payment, we might qualify for a mortgage if our credit score and other factors are in good shape.

Get Student Loan Payment Help Today!

Contact me or call 909-552-1238 to set up a consultation, either in-person at one of our three office locations or virtually, to discuss your monthly debt payments. I can help you determine if a different student loan repayment program can help you qualify for a mortgage. We may be able to reduce your debt-to-income ratio even more with additional options. If you are ready to be a homeowner, let’s talk about preparing your finances to help you qualify.

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