How Do Student Loans Affect Getting a Mortgage in Davis County?

Can you buy a home in Davis County while you still owe student loans? Yes. Many buyers do. Student loans do not disqualify you. They do count in the numbers a lender uses to decide how much you can borrow, mostly through your monthly payment.

The goal is to know your numbers before you start touring, so a payment you did not plan for does not change your budget after you have found a home.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. She explains how debt fits into a loan so buyers walk into a lender conversation with their questions ready.

Lenders compare your monthly debts to your monthly income. That comparison is called your debt-to-income ratio, or DTI. Your student loan payment is one of the debts that goes into it, along with a car loan, credit card minimums and the new mortgage payment.

The tricky part is that the payment a lender uses is not always the one on your statement. Loans that are in deferment, forbearance or an income-driven plan can be treated differently from loans in a standard repayment plan, and the rule depends on the loan program. A conventional loan, an FHA loan and a VA loan may each handle it in their own way.

I will not pretend there is one rule that fits every case. Your lender can tell you which one applies to your loan type and your repayment status. Ask them to show you the payment they plan to count, in writing.

1. List every student loan. Servicer, balance, monthly payment and repayment status.
2. Check your credit report. Make sure each loan shows correctly. You are entitled to review your reports from the national bureaus.
3. Confirm your repayment plan. If you are in an income-driven plan, get the current payment amount in writing.
4. Gather income documents. Pay stubs, tax returns and W-2s, depending on how you earn.
5. Talk to a lender early. Ask what payment they count and how it affects your budget.
6. Compare more than one lender. Different lenders can explain the same loan differently.

Doing this before you shop keeps you from falling in love with a home outside your range.

Should you pay them off first? Not automatically. It depends on the balance, the interest rate, how much cash you have for a down payment and what the payment does to your ratio. Using all of your savings to clear a loan can leave you without cash for the down payment, closing costs and moving.

In some cases, paying down a smaller loan with a high payment can improve your ratio more than paying down a large one with a low payment. In other cases, keeping cash is the safer choice. That calculation belongs to you and your lender, and a tax or financial professional can weigh in on the bigger picture.

What I would suggest is to run the numbers both ways before you commit. Ask your lender to show your budget with and without the payoff.

• Assuming a deferred loan does not count. It often still does in some form.
• Changing repayment plans mid-application. A new payment can change your numbers. Ask first.
• Draining savings to pay off a loan. Cash for the down payment and reserves matters.
• Skipping the credit report check. Errors happen, and they are easier to fix before you apply.
• Taking on new debt. A new car or card between pre-approval and closing can change the answer.
• Guessing instead of asking. The lender's number, in writing, is the one that counts.

Here is a typical example, not a client story. A buyer in their early thirties wants to buy in Layton. They have student loans with a monthly payment, a steady paycheck and some savings.

They meet with a lender before they start touring. The lender explains how their repayment plan is counted and shows what price range works with their income and their payment. The buyer sees that a slightly lower price keeps their monthly budget comfortable, and that paying off one small loan would improve the ratio without emptying their savings.

With that plan, they shop in the right range, write offers with confidence and avoid a surprise from underwriting. The loans did not stop them. Knowing the numbers early did the work.

1. Total your monthly income after taxes. That is the money you actually receive.
2. List fixed costs. Student loans, car payments, insurance, childcare and subscriptions.
3. Estimate the housing cost. Principal, interest, property taxes, homeowners insurance and any HOA dues.
4. Add running costs. Utilities, maintenance and the things a rental used to cover for you.
5. Compare to your comfort level. The number a lender approves is a maximum, not a target.
6. Pick a price range from the payment. Work backward from what you can live with.

A lender's approval tells you what the rules allow. It does not know that you want to travel, save for retirement or help a parent. Your budget does. Many buyers find that a payment a little below the maximum feels much better in daily life.

Student loans make this step more important, because the payment is fixed and does not shrink if the rest of your budget tightens. Planning with a margin leaves room for repairs and ordinary surprises in the first year of owning.

Bring these questions to your first conversation, and ask for the answers in writing.

• Which payment will you count for each of my student loans, and why?
• Does my repayment status change how the loan is counted?
• How does each loan program you offer treat student loan debt?
• What would my price range look like if I paid off one loan first?
• What documents do you need to verify my loans and my payment?

A clear lender will answer each one. A lender who cannot may not be the right fit. Compare the answers from two lenders, because the same loan can look different depending on who is explaining it.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. When she represents you as your agent, your loan comes from your own lender, and she gives no lending advice on that deal. What she brings is the knowledge of which questions to put to them.

Ask early, ask in writing and ask more than once. Debt is easier to plan around than to explain after the fact.

Do student loans hurt my credit score?

On-time payments help your credit history. Missed payments hurt it. Your score is only one part of a mortgage decision.

Do I need to pay off my loans to qualify?

Usually not. Lenders count the payment, and many buyers qualify with loans still in repayment.

What if my loans are in forbearance?

A lender may still count a payment for them. Ask which figure they use.

Can a co-borrower help?

It can change the income and debt picture. Talk to a lender about how that works for your situation.

Are there loan programs that help first-time buyers?

Several exist, with their own rules. A lender can tell you which you may qualify for.

Charisse Walker is a real estate agent with Chalker Properties Group in Salt Lake and Davis County, Utah, and a licensed mortgage lender. Her lending background means she knows the questions to ask your lender about student loans, and she helps you build a search around a budget you trust.

The first-time buyer page explains how to plan your search, and the guide to getting pre-approved in Utah covers the paperwork. The Layton area page shows how one Davis County city compares.

Buying in Davis County with student loans? Contact Charisse and start with your numbers before you start with the listings.