Can Students Get a Mortgage?

Criteria for getting student mortgages

Can Students Get a Mortgage?

It may be challenging to earn a mortgage at any stage of life. But can students get a mortgage, or does this status alone take the opportunity off the table?

In fact, as a student, it would not be easy to receive approval for a housing loan. So, if you intend to buy a house, remember that you can secure a mortgage only during your studies.

Eligibility for a mortgage

Whether you are a student or not, you must meet specific criteria to qualify for a mortgage. These include:

  • A good credit rating of 600 or above. 
  • Monthly income to support your mortgage payment.
  • Relatively low debt-to-income ratio (ideally 36% or less). 
  • The down payment of 20% for a traditional loan (or 3.5% for FHA loans, if you qualify). 

Therefore, your student status will not affect your chances of securing a mortgage when you meet these requirements. The problem, however, is that it’s hard to meet these standards as a student. 

Getting a students mortgage

Many students have no choice but to support their studies through loans, and some can’t work full-time during their studies. Though it’s feasible for students to have a reliable credit history, maintaining a decent cash flow might be more challenging. Your loan application will be refused if the lender has doubts about your monthly mortgage settlements. 

Primarily, you’re likely to have trouble reaching the second and third requirements as discussed above. Also, you might have issues concerning mortgage loan agreements if you’re not bringing in a stable income. So, your debt-to-income ratio may be affected when you are burdened with a substantial student loan.

The debt-to-income ratio includes monthly debt related to your income. Suppose you have a student loan of $500 per month and a car loan of $300. Your monthly income would be only $1,600 as you are limited to part-time work. In that case, your debt to income ratio is relatively high, making it challenging to acquire a home loan mortgage. 

On the other hand, if you can pay for your schooling without incurring debt (or perhaps family members or employers pay the bills); therefore, you have no financial obligations to pay the monthly down payments. As a result, you may get an ideal debt-to-income ratio, especially when you’re earning a decent living while in the institution. 

Additionally, suppose you arrange a co-signer for your home mortgage. In this case, whether it’s a partner, parent, or another relative, you may still qualify for a loan even if you do not meet the above criteria.

Can you even afford a home as a student?

Before you think about acquiring a home mortgage, it is worth considering whether you can afford a house. When you’re not working full-time and have a lot of debt, then those monthly settlements may be too high for you, especially for property taxes and home maintenance costs. 

To determine whether you can afford a house:

  1. Make a budget that lists your monthly costs, including your current housing expenses.
  2. Figure out how this number changes when you buy a house and ensure that your income must support it.
  3. Keep in mind that you may rent part of the house to cover the cost if you are eligible for a mortgage. Therefore, these figures must be estimated to avoid future discrepancies.

Will students loans affect your chances of getting a mortgage after graduation?

Your student financial debt alone won’t affect your chances of obtaining a mortgage after college graduation, primarily if your monthly settlements are relatively low contrasted to your post-studies incomes. In addition, the timely payment of student loans will improve your credit score and make you an ideal candidate for a mortgage.

You can refinance the student loan at a lower interest rate if a debt is an essential part of your income. This will save you money by limiting your monthly payments, thereby increasing your debt-to-income ratio. 

Remember that as a student, you cannot instantly qualify for a mortgage. This will make the task more difficult, but it is worth applying if your financial situation is good and you are confident that you can keep up with the cost of buying a house.