For anyone who has ever borrowed money, one of the things that will follow you till the end is a student loan. Repayment terms on a student loan, specifically state that the loan will get paid in full. You can’t short the debt, you can’t bankrupt the debt, and it will follow you until the loan is paid off in full. They are extremely intense in their collection practices. If you have a student loan and you’re trying to get qualified to buy a home here are some things you must understand.
1st things 1st, a lender cannot just simply look at a student loan or any other obligation for that matter and just arbitrarily choose to ignore it. Lenders must support a requirement to the lender or the ability to repay. To support the ability to repay means every single debt and expense must be accounted for when the lender is examining your cash, credit, and income in support of the loan you’re desiring to try to qualify for. In this examination process if you have a student loan and you have a payment on that student loan at $100 a month, that $100 a month is blended into your debt-to-income ratio. If you don’t have a payment on that student loan, or if you are refusing to make the payment that is due on that student loan. Ask yourself this, did you apply for this loan on your own? Did you sign the agreement that promised that you would repay the debt? For most, the answer is probably yes. This means you owe the money even if you have a dispute with them, you still owe the money because you applied for the loan on your own and signed the paperwork promising to repay the debt. If you don’t have a payment on that student loan as a result of Covid-19, the loan must be taken out of forbearance and the lender must have a payment associated with the debt or the debt must be paid off in full. A lender cannot just arbitrarily look at a student loan and just choose to ignore the obligation because you might have a dispute with that lender or that lender has your obligation in forbearance it still must have a payment associated with that obligation so the lender can account for the liability. If you have a dispute with the lender, bite the bullet and get a payment plan created and set up. The payment could be very low and could be as little as $100 a month for example. Call your service and get a payment associated with the student loan. Then provide that payment of this student loan to the lender so they can properly calculate your debt-to-income ratio and subsequently tell you how much you might qualify for when buying a home.
Buying a house is going to offer you and your family significant long-term financial benefits. Most importantly, gives you a place over your head to live without a gyrating payment because it’s not an adjustable rate or a variable rate payment like rent is. It will build you wealth for sure over time, as a byproduct of being able to write off all your interest and all your taxes as well as pay down the principal balance. If you add those advantages to buying a house versus the inconvenience of having to deal with perhaps a disagreement with your student loan company, choose to buy the house, and deal with the student loan later down the line after you already own the home, why? It gives you a better financial bang for your buck versus putting your whole housing project on hold to try to deal with this student loan. Guess what, if it takes you 2 or 3 years to deal with the student loan, the housing markets going to change many times during that course of your going back-and-forth with the student loan company. You might just find yourself potentially priced out of the market because you weren’t willing to trust the lender’s advice in the 1st place. If you have a student loan of any kind, in determining what you might qualify for a better plan would be to let the lender pull credit, give them the financials, and work with them to get a pragmatic home buying plan created for you and your family over time. That way you can work with the lender and mutually decide that the timing is beneficial once the lender knows what they’re dealing with.
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