Reducing Your Debt-to-Income Ratio: Student Loan Forgiveness
One of the important considerations that mortgage lenders look at when deciding whether you will get a loan, and how much they will lend you, is your debt-to-income ratio. This ratio expresses what percentage of your income goes to paying off your debts.
For example, if your monthly income is $4,500, and your total debt payments amount to $1,300, you figure your debt-to-income ratio by dividing 1,300 by 4,500 and then multiplying the result by 100. In this case, the debt-t0-income ratio is 28.89%. Most will round it up to 29%.
Student loans and debt-to-income ratio
If you have student loans, your debt-to-income ratio will be affected. If it is too high, then you could be denied the mortgage loan you want. Helping pay down your student loans can help you improve your chances with the mortgage lenders. And, happily, there are some student loan forgiveness programs that can make this even easier.
- Public Service Loan Forgiveness Program for those who work in a public service job for 10 years.
- Grants for teachers who work in certain areas (low income or rural, for example).
- AmeriCorps.
- PeaceCorp.
- VISTA.
I know that my mother is benefiting from a program that allows partial student loan forgiveness for those who teach in rural areas. Even though my mom already owns a home, having the student loan forgiveness will help alleviate the fact that she took them out later in her life to finish her degree.
Just as there are specific programs that can help you pay for schooling through scholarships, there are also programs that can help you pay off the debt you have incurred after you are done. Look around for opportunities to help you pay down your student loans. It’s one of the best ways to improve your debt-to-income ratio.
Tags: student loan forgiveness, student loans, home mortgage loan, mortgage loan blog,
debt-to-income ratio, mortgage lenders, public service jobs
July 29th, 2008 at 11:07 am
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