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Can I Qualify for an FHA Loan With a Student Loan Debt?

Student loans provide a pathway for many students to afford a college education. However, too much debt can make it hard to qualify for a mortgage. Fortunately, an FHA loan Houston is easier to qualify for than a conventional mortgage.

Student Loans: How They Affect Your Ability To Qualify for an FHA Loan Houston

There are several ways your student loans may affect your ability to get an FHA loan Houston. Mortgage lenders Houston will consider your entire credit history when making a decision.

FHA Loan HoustonDebt-To-Income Ratio

The debt-to-income ratio comes in two types. The first is your front-end ratio. Mortgage lenders Houston will calculate this ratio by dividing your estimated monthly mortgage payments by your gross monthly income. Lenders include the principal, taxes, insurance, and interest when they determine your monthly mortgage payment. Most lenders set a limit of 28% on conventional loans. FHA loans Houston allow a maximum ratio of 31%.

The back-end ratio compares your total debt, including student loans, to your income. To get this ratio, lenders add your monthly debt payments and your housing expenses and then divide the total by your gross monthly income. Most conventional mortgage lenders Houston set the limit for this ratio at 36%. However, the limit for an FHA loan Houston is 43%. This means that while your student loans will play a role in whether you qualify for an FHA loan, it will still be easier to qualify for than a conventional mortgage.

Credit Score

You may be able to make up for a debt-to-income ratio that is not ideal by having good credit. Yo will need a minimum credit score of at least 500 to qualify for an FHA loan Houston. However, to be eligible for the 3.5% downpayment, your score must be 580 or higher. Making on-time payments on your student loans and other debts will help your credit score. Additionally, avoid carrying high credit card balances and applying for too much credit.

Downpayment

Based on your credit history, you may be eligible for a downpayment as low as 3.5% of the sale price with an FHA loan Houston. However, a higher downpayment will reduce the amount you need to borrow and improve your front-end ratio. If your student loans are pushing you over the maximum rate, increasing your downpayment may help you qualify.

Income and Job History

Most mortgage lenders Houston prefer to see a steady employment history of at least two years. If you are a recent graduate, it may pay off to wait to start applying for mortgages. Additionally, your income is one of the major components of your debt-to-income ratios. You can improve your rates by increasing your income. An income boost may help you overcome a large amount of debt due to student loans.

FHA Loan HoustonHow You Can Boost Your Chances of Qualifying for an FHA Loan Houston by Reducing Debt From Student Loans

If your debt-to-income ratio is high, consider paying off your student loans faster to improve your chances of qualifying for FHA loans Houston. Student loans do not carry pre-payment penalties. If you can boost your savings or increase your income, you can use the money to make extra payments on your student loans. Consider cutting unnecessary expenses out of your budget, getting a second job, asking for a raise, or starting a side gig.

How Refinancing Your Student Loans Affects Qualifying for an FHA Loan Houston

You may be able to refinance your student debt to get a lower interest rate or shorter repayment term. This can help you pay down the balances on your student loans faster, which may help you qualify for FHA loans Houston. However, if you choose to refinance with a private lender, you will lose the federal repayment protections that come with government-backed student loans. Private lenders also offer less flexible repayment terms. If you lose your job, switch careers or go back to school, you may find it challenging to keep up with your payments on a refinanced loan.

Debt from student loans can impact your ability to obtain an FHA loan Houston. However, there are several steps you can take to improve your chances. Contact the team at Rock Mortgage to discuss your options. You can reach us by phone at (832) 230-3067 or complete our online form.

 

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Can I Qualify for an FHA Loan With a Student Loan Debt? | Rock Mortgage — Houston, Texas