Buying a home is the next logical step after establishing your career and leveling your finances. However, you still have student debt, so you’re worried about your chances of qualifying for a mortgage in San Diego. Fortunately, there are student loan forgiveness programs for first-time buyers you can apply for.
- Improve your debt-to-income ratio
- Lower your student loan interest rate
- Consider an FHA mortgage loan
- Apply for a mortgage
Lowering your debt-to-income ratio is one of the best things you can do to increase your chances of acquiring a mortgage loan in San Diego, CA. Lenders want to make sure you can afford your new mortgage payment as well as keeping up with the payments on all of your current debts, including school loans. Ideally, your debt should not exceed 50% of your income.
Talk to your student loan lender about your options for lowering monthly payments. You might want to think about refinancing your private student loans if you have good credit, a job, and a clear repayment strategy. Those that meet the requirements could be able to benefit from lower interest rates, which might reduce their monthly payments and overall interest costs.
If first-time home buyer student loan forgiveness isn’t enough, you should consider getting a Federal Housing Administration-backed (FHA) loan. Depending on your credit score, you should at least have a debt-to-income ratio (DTI) of 43% or less to qualify for an FHA loan. That means your monthly expenses should not exceed 43% of your income. The good thing is that when it comes to DTI and credit requirements, FHA loans are more forgiving than conventional loans. Even those with a short credit history can obtain alternative credit depending on their ability to pay their bills.
After browsing listings for homes for sale in San Diego and picking out a home you want to buy, the next logical step is to select a lender and complete an application for a mortgage. You might be able to apply in person, over the phone, or online, depending on the lender.
All lenders demand information on you and anyone else who will be named as a co-borrower on the mortgage, such as a spouse or partner. Upon obtaining your consent, your lender will also check your credit report, which will include your outstanding student loan debt.
Additionally, you will need to prepare pay stubs, bank statements, tax returns, and other financial papers in advance to ensure the mortgage preapproval application process runs smoothly.
Once all of your paperwork has been verified and the house has been appraised at the required value, your lender will then provide you with a Closing Disclosure that details the terms of your loan and your closing costs. All that’s left to do is acknowledge your disclosure, show up for the closing, and sign your loan.
YOUR DREAM HOME IS WITHIN REACH
Student loan debt can be a drag, but there are ways to achieve your dreams of homeownership in spite of it. As you begin your home buying journey in San Diego, explore the best homes you can afford. Get in touch with Jacobo Realty Group for the best property listings in San Diego. Call us today at 760.632.8900 or contact us here to learn more.