Are you a college student thinking about buying a house? You might be wondering if it’s even possible to own a home in your current situation, considering the rising student loan debt you’re dealing with while working part-time or not at all. Fortunately, it is still possible to acquire a home while still a student. All you need to do is meet the requirements for specific mortgage programs that are offered both locally and nationally.
You’ll discover the programs created for borrowers just like you as you continue reading. You’ll also discover how to properly qualify for a mortgage once the student loan payments begin.
Best Programs For Student Home Buyers
Consider the programs available to you based on your debt-to-income (DTI) ratio, credit score, and funds available for a down payment if you want to purchase a home as a current or past student who is dealing with student debts.
If your DTI ratio is greater than 50%, you could not be eligible for a traditional loan. A conventional loan is a mortgage that adheres to the rules established by government-sponsored organizations Fannie Mae and Freddie Mac, which standardize mortgage lending in the United States.
However, you could still be able to use a government-backed loan to purchase a house. These loans are less hazardous against a loss from default since they are insured by the federal government. This makes it possible for mortgage lenders to approve applicants with lower DTI rates for loans.
Let’s look at some of the programs that can make it simpler for college students to be approved for a home loan.
An FHA loan
FHA loans have fewer standards and are underwritten by the Federal Housing Administration. Among the prerequisites are:
DTI ratio: In many circumstances, FHA loans have a maximum DTI ratio of 57%.
You must have a credit score of at least 580 to be eligible for an FHA loan.
Additionally, you might be able to qualify for an FHA loan by having the first two years of your higher education count as employment history.
a VA Loan
The Department of Veterans Affairs (VA) may approve you for a VA loan if you have served in the military or National Guard. Among the prerequisites are:
DTI ratio: A VA loan allows you to purchase a home with a DTI ratio of up to 60%.
To be eligible for a VA loan, your credit score must be at least 580.
Make sure you satisfy service criteria before applying for a VA mortgage.
Loan Solutions by Fannie Mae
Additionally, Fannie Mae has several regulations in place to help borrowers who have student loan debt yet wish to purchase a property. These possibilities consist of:
Homeowners have the option to pay off high-interest student debt while potentially refinancing to a mortgage with a lower interest rate thanks to student loan cash-out refinancing.
Others’ Repayment of Debt: If the borrower’s non-mortgage debt, such as credit cards, vehicle loans, and college loans paid by someone else, is omitted from their DTI ratio, it might in some cases be simpler for them to qualify for a house loan.
Calculating student debt payments In some circumstances, lenders are permitted to include data from credit reports on student loan repayment, which may make it simpler for students to qualify. Current State Programs
In addition to mortgage alternatives sponsored by the government, some states have unique programs for graduates buying homes near their universities. These programs offer financial assistance and reduced mortgage interest rates. Check with your state housing authority to see what programs are offered there. Here are a few illustrations:
Maryland: For students with at least $25,000 in student loan debt, the Maryland Mortgage Program offers a reduced interest rate and down payment help.
Michigan: For qualified graduates and first-time homebuyers buying property in specific communities, the MI Home Loan program offers reduced interest rates.
Ohio: Graduates who meet the requirements can receive a grant and down payment help through the Grants for Grads Program.