This question is for people who have bought a house, tried to buy a house, or similarly know what they're talking about. Also, I did a search for this topic, but didn't find anything in the limited results.

I want to buy a house in the next couple of years, once I get a FT job and a good down payment together... the thing is that I have somewhere on the order of $17,000 in student loans to pay off. Will this prevent me from getting a loan entirely or will it just affect my interest rate? This and my car payment are my only debt.

Anyone had any experience with this?

Thanks!

4/10/2006 10:53:52 PM

If you have a good payment history, it's not a big deal. It will reduce the total amount they'll finance, but that shouldn't matter unless you're buying too much house anyway.

4/10/2006 11:02:47 PM

it really comes down to your debt to income ratio.

it also depends on your payment history regarding the loan. if you've been paying it on time, with very few or no late payments, you should be fine.

figure out what you think you will be making per month, and subtract out all your monthly expenses. (be generous with this, as it is better to be safe than sorry).

general rule of thumb: your monthly mortgage, taxes, insurance, HOA dues should only consume 1/3 of your monthly income.

4/10/2006 11:04:58 PM

Gotcha. Thanks

4/10/2006 11:05:23 PM

I have about 5k in loans and had no trouble getting approved for a mortgage

4/10/2006 11:38:48 PM

Start an automatic draft with your student loans to lower the % AND to get them on good terms with you. And to answer your question ... it depends. Of the three major credit reporting agencies, EquiFax was the only one where my student loans showed up.

I'm talking outta my mouth without any facts/experience to back this up, but I see no problems if your credit history is good and your income meets the mortgage lender's requirements.

4/11/2006 6:38:27 AM

My husband and I have perfect credit, no late/missing payments, and we have plenty of income to handle what we spend. However thanks to recent changes to the way student loans are handled banks can now hold those debts against you even if they are in deferment. I talked with a broker at BOA about this last year.

4/11/2006 9:31:49 AM

It should only affect the amount you can borrow.

4/11/2006 9:33:40 AM

what ImYoPusha said.

4/11/2006 9:35:39 AM

One of the main things banks/lenders look at when you apply for your loan is your debt to income ration. Basically, they take how much money you will be making (after taxes) monthly and subtract all the payments you have to make - car payments, credit card payments, financial aid payments, etc. Then, they base how much money they will loan you on that number (along with other factors - credit history, etc.)

Like someone else said above, even if your fin. aid payments are in deferment they still count against you based on what the monthly payment will be. Also, you can setup your financial aid payments to be lower the first two years and then they increase. The banks will count the higher of the payments because that's what you will be paying for the majority of the life of the loan.

Basically it comes down to how much money you have monthly after taxes and you pay all your recurring bills (not utility, phone, or cable but credit cards, car, etc) and your credit history (collections, late payments, etc).

My wife and I just built a house and moved in in Feb. We both have financial aid ($30k+) and just a little bit of credit card debt (> $3k) and we didn't really have a problem getting the loan ($200k).

4/11/2006 9:51:36 AM

17,000 IN STUDENT LOANS IS ONLY GOING TO EFFECT YOUR CREDIT IF YOU FAIL TO MAKE PAYMENTS....USUALLY WITH THAT MUCH IN LOANS YOUR MONTHLY PAYMENT WILL COME OUT TO A LITTLE OVER $100 A MONTH....WHICH DOESN'T HURT YOUR DEBT/INCOME RATIO VERY MUCH.....IT WILL ONLY EFFECT YOUR CREDIT REPORT IF PAYMENTS ARE LATE.........I GOT HIT ON ONE OF MY REPORTS BECAUSE OF A BREAK IN COMMUNICATION WITH THE UNIVERSITY AND THE LOAN CONSOLIDATOR....40 POINTS ON MY CREDIT REPORT....THEY EVENTUALLY FIXED IT THOUGH BUT IT TOOK A WHILE

4/11/2006 10:31:26 AM

Quote :

"17,000 IN STUDENT LOANS IS ONLY GOING TO EFFECT YOUR CREDIT IF YOU FAIL TO MAKE PAYMENTS....USUALLY WITH THAT MUCH IN LOANS YOUR MONTHLY PAYMENT WILL COME OUT TO A LITTLE OVER $100 A MONTH....WHICH DOESN'T HURT YOUR DEBT/INCOME RATIO VERY MUCH.....IT WILL ONLY EFFECT YOUR CREDIT REPORT IF PAYMENTS ARE LATE.........I GOT HIT ON ONE OF MY REPORTS BECAUSE OF A BREAK IN COMMUNICATION WITH THE UNIVERSITY AND THE LOAN CONSOLIDATOR....40 POINTS ON MY CREDIT REPORT....THEY EVENTUALLY FIXED IT THOUGH BUT IT TOOK A WHILE"

In case you didn't notice all the capital letters....YOUR CAPS LOCK IS ON!

One other thing about the home loan...get copies of your credit report from all three credit bureaus. It's free (once a year) but even if you have to pay to get copies DO SO! You need to make sure that there isn't any mistakes on your report. Also, do a little research and you can find ways of easily cleaning up your credit (if needed) that doesn't take that long. It could make a big difference in your interest rate.

[Edited on April 11, 2006 at 10:35 AM. Reason : .]

4/11/2006 10:32:59 AM

ok

the first thing the bank looks at is your Beacon score, this shows the strength of your repayment history - if your score is 780+ you've pretty much got a green light on whatever else you want to do - they will make exceptions to get you the loan at that point

debt to income is another important ratio (you're looking at ~40% as a cap) - irola previously described cash flow when he talked about debt to income (another valid concern, but one that the bank assumes is in line if the ratio is acceptable because who's to say what an adequate cash flow as long as it's positive) - debt to income = payments / income

payments are based on balances of term loans and a percentage of outstanding balances on revolving accounts (in your case it's what the monthly pmt on the student loan will be + car payment + credit card and other revolving account balance payment + the morgtage payment)

you also consider utilization with home mortgages - how much of the available credit is being utilized (you want to keep this under 50% when the credit is pulled)

employment history is also important to consider - they like you to document two years of steady income - starting a new job you will need some confirmation of future income stream or you'll need to find a broker who can pull some shenanigans - otherwise you'll be in a "no doc" loan situation in which case you can wind up paying points

both my gf and i just changed careers and she's now self-employed so we thought we were going to be in a tight spot with the mortgage and we would've been had our credit not been so stellar that our employment history wasn't a requirement

let me know if you have any other questions or if you want i can put you in touch with an excellent loan officer

4/11/2006 11:54:13 AM

Quote :

"irola previously described cash flow when he talked about debt to income"

Oops!

4/11/2006 12:09:59 PM

Thanks to all who've answered... I feel a lot better about this now

Quote :

"In case you didn't notice all the capital letters....YOUR CAPS LOCK IS ON!"

It's ok, that's how he ALWAYS types. We've learned to get used to it around here.

4/11/2006 1:33:14 PM