Knowing how your student loans can impact your mortgage options is important, but keep in mind your DTI (debt to income) ratio is just one element in the underwriting process, and there are often compensating factors (such as credit score) that lenders can use to qualify you for a loan.
If you have student loans and want to improve your chances of being approved for a mortgage, here are some tips:
1. Switch to an income-driven repayment plan. This can help lower your DTI ratio and increase your odds of getting approved. It’s a good idea to make this switch at least a year before applying for a mortgage loan.
2. Shop around and choose a reputable lender who can help you get preapproved. An experienced loan officer can discuss your student loan situation with you and offer financing programs best structured to meet your budget goals
3. Consider adding a co-borrower to the loan. Additional income always helps with qualification, this is an easy way to reduce your DTI ratio — but be sure your co-borrower has little to no debt and a high credit score.
4. Widen your options. Consider buying a less expensive or smaller home, or in a more affordable area.
5. Wait things out. Save up for a larger down payment, reduce your debt and allow any negative information on your credit report to age, which can bolster the likelihood of you getting approved.