Can you buy your first house with a ton of student loans? Yes, but…
Yes! We did but had to learn a lot along the way. This article discusses the challenges we encountered and how we found a way forward with zero closing costs. It was difficult to get approval but not impossible.
Modern financial services often used by new homebuyers like affirm, Earnin, PayPal, and Zelle also posed unexpected challenges that could have been avoided given what we learned.
Student Loans
Thanks to recent legislation, FHA loans can use your minimum payment through your repayment plan to calculate your discretionary income. This means that if you have a lot of debt, consolidating and entering an income driven plan like the new one offered under President Biden’s administration, you can qualify for an FHA loan given your payment doesn’t drive up your debt to income ratio too high.
Let’s say you have a zero payment under your income driven plan. They will not let you report a zero payment for most FHA products and you will need an official document showing your alternative payment. Often, available documentation only shows what your payment would be given the worst case scenario where you fail to verify your income for years and end up paying 5 times more than you would. This will seriously drive down the amount of house you can afford.
