Life with Student Debt: Qualifying for a Higher Home Purchase Price
Are you a new graduate with student debt? You’re not alone. Many students need to take on debt to make it through college or university. Taking on debt as a student can be a good thing. However, it can also affect how much you can spend on a home. Some lenders treat student debt differently than regular debt.
Let’s discuss ways to restructure your student debt to maximize how much you can afford to spend on a home.
Student Debt: In Payment vs. Not in Payment
Did you know that mortgage lenders treat your student debt differently, whether it’s in payment? That’s right. If you have student debt, you may have the option of delaying it or going into repayment status. This can work to your advantage when applying for a mortgage.
With a typical line of credit (LOC), you must use 3% of the outstanding balance as a monthly payment when qualifying for a mortgage. However, if it’s a student LOC and not yet in payment, you may be able only to use 1% of the outstanding balance with some lenders. It all comes down to working with the right lender.
Likewise, if it’s a student loan rather than a student LOC and not yet in repayment, you may also be able to use a lesser amount. It’s usually whatever payment appears on your credit report. This, again, can be advantageous to you, as the lower the payment that occurs, the less it will affect how much mortgage money you qualify for.
Student Debt: Loan vs. LOC
How lenders debt service a student loan versus a student LOC is different. By understanding this, you can use it to your advantage.
With a student LOC in payment, lenders typically use 3% of the outstanding balance for debt servicing purposes. Whereas if it’s a student loan, the lender will use whatever payment appears on your credit report.
By understanding this and doing the math on which payment would be lower, you can help maximize how much more in mortgage funds you can borrow.
How the Canadian Mortgage App Can Help
With the Canadian Mortgage App, you can run any of these scenarios.
With the Get Pre-Qualified calculator, you can enter a few simple details about your debts and find out how much you could afford to spend on a property, whether your student debt is in payment or not, and whether it’s a LOC or loan.
What are you waiting for? Download the Canadian Mortgage App today to try it out.