Will Your Student Loans Keep You from Getting a Home?
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Will Your Student Loans Keep You from Getting a Home?

Student loans may not have the negative impact on getting a mortgage loan than you might think. But there are some things to keep in mind before applying for a mortgage.

If you are like many Americans, you have a large amount of student loans looming over your head like a black cloud. Student debt is not something that is uncommon in today’s world, but can it keep you from owning a home?

In order to understand the type of effect your student loan will have on your ability to get a mortgage, it is important to know the two basic types of debt that a mortgage lender looks at. The first type of debt is an installment loan. An installment loan is a debt that you must pay a fixed amount every month. Your student debt is considered an installment loan just like auto loans, mortgages, etc.

Installment loans, specifically student loans, have an impact on your lender’s decision on granting you a mortgage. While the impact of large installment loans can be adverse, it is unlikely to be as detrimental as large amounts of revolving credit (which ordinarily come from credit cards). In other words, student loan debt is more favorable than credit card debt so having a large amount of student loans is not going to look as bad on your credit score as having a couple maxed out credit cards.

However, if you have student loans and you do not take them seriously, you could adversely affect your credit a great deal. Many students use their student debt to begin building their credit history. If you default on your student loans, your credit score will be greatly affected. That is why it is so important to make payments on your student loans on time every month to avoid those dings on your credit history.

If you are planning on applying for a mortgage in the near future, it is important to start paying down your student loans. But it is more important to pay down your other debts as well. The federal government allows many forms of aid to help you repay your student loans. For instance, the normal repayment program allows you up to 25 years to pay off the loan in small monthly installments. There is a consolidation option which allows a borrower to combine several student loans into one easy to manage payment each month. This often results in a lower monthly payment and longer repayment terms. You can also choose to defer your loan payments for several years if you have a financial hardship.

With all of these options available to help you repay your student loans, defaulting on your payments is the worst option to take if you ever plan on having a mortgage. Keep your student loan payments up to date and they won’t have the horrible impact on your credit history that you may have originally thought.


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