Gustave Doré’s illustration from the “Rime of the Ancient Mariner” depicts how student loan (or any other) debt can weigh you down when trying to get a home mortgage.
Source: Wiki Commons
Part 1: The Problem
I’ve been thinking about the student loan debt problem a lot recently. It may be the biggest albatross around the necks of the younger generations today. I would love to solve the whole problem. While I haven’t done that, I realized I know of some strategies to help prevent or minimize it in some circumstances.
This post is the first of five on the topic. I hope it is useful to somebody in some way. I know it is not directly related to real estate or investing, but it breaks my heart to see the levels of debt some kids acquire only to find out they can’t work in their chosen field with the degree they obtained.
A CNBC article claims, “buying a home can be almost impossible with massive student loan debt.” Any amount of student loan debt can make qualifying for a mortgage more difficult because lenders have strict guidelines for a debt-to-income ratio. That is, your total monthly debt payments (for cars, credit cards, mortgages, student loans….) can’t exceed a certain percentage of your gross income. That percentage can vary a little by lender, but it is always less than 43%.