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How to Student Loans Weigh on Mortgage Loans?


lmarrie
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I am hoping to buy a house next year. At this point I have no credit cards only student loans which were deferred but now I am also back in school.

As far as overall debt and debt to income ratio how to lenders count student loans?

I hope you get the gist of this question because I'm not completely sure how to ask it.

Thanks in advance!

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I am hoping to buy a house next year. At this point I have no credit cards only student loans which were deferred but now I am also back in school.

As far as overall debt and debt to income ratio how to lenders count student loans?

I hope you get the gist of this question because I'm not completely sure how to ask it.

Thanks in advance!

I do not know your situation - ultimately it depends on how much income you make. You need to factor in your school loan payments as if you had them right now.

I recommend getting a copy of your credit report and work to get your score as high as possible. The higher your credit score to more options you have.

If you have no history of making payments, there is nothing driving your credit. People do not automatically have a good score, you have to establish yourself. One option could be getting a co-signer.

It is important to understand the question - do you want to pay more or less?

Rushing to get into a loan that you will have for a period around 30 years. The terms can result in a higher payment. Compared to waiting it out and establishing yourself, can result in a lower payment. 8]

:)

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In my experience, student loans are FICO friendly installment loans. I have a ton of them. They will use the monthly minimum payment against your income for debt-to-income ratio purposes. Have you made payments at all?

Overall debt amount, not that important. It is your monthly payment, and its history.

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Thanks for both of your responses. No I haven't started paying on them yet but I'm thinking about starting in January. By the time I hope to be ready to apply for my mortgage the only monthly bills I plan to have are utilities, mortgage and student loan payments.

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Thanks for both of your responses. No I haven't started paying on them yet but I'm thinking about starting in January. By the time I hope to be ready to apply for my mortgage the only monthly bills I plan to have are utilities, mortgage and student loan payments.

Marrie

2 more cents of advice - think of this as investing in yourself. When you begin your school loan repayments. Your loan is going to be structure at $xx.xx per month over a xx month term. Chances are this is going to be structured as an installment type of a loan.

By sending more then the agreed payment, shortens the term and you get reported to the CB's has being more responsible. You credit score can go up!!!!!

This web site has volumes of information you can learn how to, maintenance, and what you can do to keep your score high!

:)++:)++:)++

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That's a great idea thanks for the advice! How much over the minimum payment do you suggest?

Marrie

2 more cents of advice - think of this as investing in yourself. When you begin your school loan repayments. Your loan is going to be structure at $xx.xx per month over a xx month term. Chances are this is going to be structured as an installment type of a loan.

By sending more then the agreed payment, shortens the term and you get reported to the CB's has being more responsible. You credit score can go up!!!!!

This web site has volumes of information you can learn how to, maintenance, and what you can do to keep your score high!

:)++:)++:)++

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My student loans are roughly $1200/month. I pay $1300. Student loans are structured in a way that any overpayment is applied immediately but then the following month's payment is reduced by the additional amount. So in my example, the required payment for month #2 is only $1100. Eventually you will receive monthly bills for $0 (but of course keep paying!)

This is great for FICO, but it also adds flexibility. Because if you run into a tough month (say roof collapses or car needs major repair), you can skip a monthly student loan payment without any recourse.

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Nearly all simple fixed interest installment loans are structured this way. If you want to save money on interest, and pay the loan off even faster, you might be better off making a separate "principal only" payment in addition to your monthly payment rather than sending in one "overpayment". That, however, doesn't give you the flexibility to miss payments as jq mentioned. [Although, I'd argue that that flexibility is moot anyway because of all the crazy repayment options available on student loans...]

[note: conventional, fixed rate mortgage loans are one of the only exceptions where your monthly payment remains unchanged regardless of how much extra you pay and the extra principal reduces your term without specific instruction from you on how to apply payment]

Edited by Bigwoodystyl
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[note: mortgage loans are one of the only exceptions where your monthly payment remains unchanged regardless of how much extra you pay and the extra principal reduces your term without specific instruction from you on how to apply payment]

Actually, any adjustable rate loan is "recast," prior to interest rate adjustments. The new payment is usually sent out a couple of months in advance of the actual rate adjustment. The new payment amount is based on the unpaid balance, new interest rate and time remaining on the loan (to amortize at thirty years).

Also I still have an Interest Only 30 year fixed rate mortgage that is recast yearly as well. My interest only payment goes down every year as I prepay the loan. At the end of my ten year interest only option, I do not want the payment shock of a twenty year loan, so I prepay some of the principal. It helps every now and then to have the freedom of the lower payment.

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