Newrez myloancare mortgage: Your credit score is one of several factors that lenders look at when evaluating your financial profile for a mortgage. It is determined by how much debt you owe, what kind of debt you have, and if you pay it on time- every time.
How Do Student Loans Impact Your Finances?
Student loan debt can affect your credit score positively or negatively. Missing or late payments to your student debt will lower your credit score. And these kinds of credit dings will remain on your credit report for several years. Making payments on time, however, can improve your credit score. Set up monthly auto payments for your student loans to boost your credit and give you peace of mind.
Having student loan debt also affects your debt-to-income ratio (DTI). DTI is another factor that lenders consider in your mortgage application. DTI is essentially the comparison of your monthly income to owed debts. You want to keep this balanced, so that your debts don’t completely outweigh how much money you’re bringing in each month.
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To calculate your DTI, add up all of your recurring monthly debts (minimum credit card payments, car loan payments, and, student debt payments) and divide it by your gross monthly income.
Should You Pay Off Student Debt Before Applying For a Mortgage?
It doesn’t have to be one or the other. If owning a home is one of your top financial goals and you have student debt, there are ways to achieve that! As mentioned above, your DTI is a big factor in getting your mortgage application approved. So work on getting that down first.
Tips to Get Your DTI Down
Talk to your local lender about your financial profile and what sort of DTI they’re looking for. If your DTI is still too high but you’re itching to get on that homeownership game, there are ways!