All over the civilized world especially in Europe and America, students enjoy government support in various ways. This is especially, via the student loan scheme. In the United Kingdom alone, home students are entitled to receive student loans. That is to cover their tuition fees, accommodation, feeding, and books. Also in the United Kingdom, the criteria for receiving student loans are, that you must either be a citizen of England, or that you have a resident permit. International students are not allowed to receive any benefit in the form of a student loan, hardship loan, and other benefits such as accommodation and public funds. While the UK government makes it a lot easier for students, to receive these loans, there is always the problem of paying back after the student has graduated from the University.
Understanding The Denial Of Mortgage Due To Student Loan
However, Most young graduates are not able to pay back their student loans. This is because they are not able to get a job, or they have a job and do not want to pay back. All of these have consequential effects, when the student is trying to get a mortgage. You’re not being able to pay back your student loan, which will deny you access of having or buying a house through a mortgage or even buying a car.
However, The United States of America is not an exception as the student loan debt. In 2023 has risen to a total of $1.7 trillion (US Dollars) hence putting a considerable strain on potential homemakers. It is a well-known fact, that student loans can be significant impediments to securing a mortgage, which is largely due to some powerful key factors such as the debt–to–income (DTI) ratio and credit score.
Therefore, We are going to delve into the complex intersection of student loan debt, and home ownership. However, Hence exploring the recent changes in lending policies, and a comprehensive overview of the current house market. This article will also discuss, the reason why student loans can deny you access to getting a mortgage.
What You Can Do If You Were Denied Of A Mortgage Due To Student Loan Dept
If you were denied a home loan, because of your student loan debt recently, you don’t have to lose hope. There is no need to panic or discouraged when you get denied a mortgage due to student loan debt. There are several strategies I have written down here, that can help you improve the chances of getting a pre-approval on your next application. The question is, what are the strategies? Well below are the strategies, you need to implement to get pre-approval for your next application.
Read More: HOW TO SECURE A PERSONAL LOAN
• You Will Need To Known The Reason Why You Were Denied
You need to understand that through the due process of your application, lenders are obligated by law to give you the specific reason why your mortgage was denied. If it is due to the high student loan debt, it will automatically affect your Debt-to-income ratio. The Debt-to-income ratio is a metrics, that lenders use to assess your ability to be able to pay back or manage your monthly debt payment, in this case, mortgage loans.
• The Need For You To lower Your DTI Ratio
The DTI ratio is defined as the percentage of your monthly income, that goes towards paying debt. However, it includes student loans, auto loans, credit card debt, and other various expenses. If you want to increase your chances of obtaining a mortgage loan, you have to do the following:
(1) Increase Your Income
In this, you have to look for a higher paying job, a second job, or a freelance job.
(2) Decrease Your Debt
You have to start paying off other smaller debt. That is to make extra payments on your student loan, or you can alternatively refinance your student loan for a lower monthly payment.
• The Adjustment Of Your Student Loan Repayment Plan
You must do this if you are on an income–driven repayment plan. In the form of Income-based repayment (IBR) and if your payment is $0, you should endeavor to get a non-zero payment. The reason for doing this, is to enable your lender to use the amount to calculate your DTI during your underwriting process.
• There Is A Need To Improve Your Credit Score
You must be aware that a good credit history can help, in giving you a good DTI ratio. The easiest way to increase your credit ratings is to keep paying your bills on time. keep your credit card balances low, and try to avoid having a new credit account unnecessarily.
• Consider Different Loan Types
There are different types of loans, and all come with different requirements, so you have to be careful in your selection. The Government-backed loans and the FHA, or VA loans are better and more lenient in comparison with other types of loans. so you should go for it when you are struggling with your student loan repayment.
• Seek A Credit Counselor Or A Financial Advisor
It is always important to seek a financial counselor or advisor. This is important when you are struggling with bad credit, due to student loans and other loans. They should be able to give you specific tailored advice on your problem, and how you can improve your credit score.
• Consider Finding A New Lender
There is always a need to seek an alternative lender. And it’s always advisable to seek an advisor with NMLS professional certifications. However, it can offer a fresh perspective or approach to your situation.
It is always advisable to reapply again when you have taken all the necessary steps mentioned in this article. That is to better your credit score. Re-applying will be the best bet at this time, if you have implored all the strategies. The chances are that you will not be denied this time.
Therefore, The above guidelines are written to enable you to bounce back again. However, if you have been denied of mortgage several times due to your student loan debt.