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Ed Francis

How college debt/student loans impact ability to buy a home.

If you’ve ever spent time online looking for houses, you know it’s easy to get drawn in as you set out to find the perfect home. You may even find yourself driving neighborhoods all weekend, popping into open houses and scheduling tours of homes that (hopefully) fit your budget. However, before you go much further in your quest to nest, make sure you are financially prepared to purchase a home.

Here, Ed Francis, a veteran mortgage loan officer with LegacyTexas Bank, answers common questions about pre-approvals and the role debt plays in the process.

When should I start the pre-approval process for a home loan?

Don’t be afraid to start the mortgage pre-approval process early. If you find the house you want before you’ve thought about financing, you may feel too much unnecessary pressure. By looking at your finances and talking with a loan officer early, you will have plenty of time to make any changes and adjustments to your finances and credit, if needed.

Some people who have great credit think they don’t think they have enough money saved for a down payment, but some loans only require a small down payment. That’s why it’s important to good get advice about your particular financial situation from an experienced lender.

What are the advantages of getting pre-approved early for a loan, even if we haven’t found the perfect house?

An early pre-approval process allows buyers to look at their credit score, income and debt-to-income ratio, and ask questions of a loan officer about how they can improve their financial situation to be in a better position to buy down the road. When I work with clients, we discuss ways to consolidate debt and pay it off faster, and we review the different types of loans that fit their individual needs. I also provide a realistic picture of what they can afford.

I only have student loan debt. Will that count against me in the pre-approval process?

It’s important for buyers to understand that different types of debt aren’t separated or counted against them differently—student loan debts, car loans, and credit card debt are all simply considered debt. A student loan payment coupled with a large monthly car payment may be what keeps someone from getting approved for a home loan, even if they have a strong job history and a high income. I have seen people come in who feel like they will be approved and have everything ready run into obstacles for financing, and then I have people who come in with trepidation who are convinced they won’t be approved for a home loan and start the process that day.

I have good credit, but no savings. Does this mean I can’t buy a home?

Some people who have great credit think they don’t think they have enough money saved for a down payment, but some loans only require a small down payment. That’s why it’s important to good get advice about your particular financial situation from an experienced lender.

What are the steps for the pre-approval process?

When beginning the pre-approval process, the first step is to schedule an initial meeting with a lender who will explain what documents you’ll need, closing cost estimates and helpful information for decision-making. Your lender will also talk with you about interest rates. They change daily, and credit scores do affect your interest rates, so it’s something you should understand before deciding which home to buy.

If I think I’m ready to buy, what do I need to do?

Preparation is key. First, check your credit report and get your score. You can find this online through various services, but also check with your lender to find out what they will look at. If you find any errors, report those to a credit reporting agency, and if your score is low, work with a trusted financial professional to learn how you can raise your credit score and start eliminating debt.

If you’re salaried, gather your pay stubs or other income documents. If not, contact a lender to find out what other documents can help them put together your financial picture.

Once you have the necessary information, schedule an appointment to meet with a reputable loan officer and begin the pre-approval process. Researching interest rates and loan types ahead of time can help you prepare for your meeting.


About the Expert

Ed Francis
LegacyTexas Bank

Ed Francis (NMLS #369895) is a mortgage loan officer with LegacyTexas Bank. For more than 25 years, Ed has been a thoughtful and thorough lender focused on assisting clients with home financing and construction loans for their primary residences and second homes. He gives each client the same care and attention that he would want to receive and enjoys educating clients so they can maximize their net worth opportunities and accomplish their financial goals.

LegacyTexas Bank (NMLS #440732) combines award-winning loan officers, a wide range of home financing options and common sense underwriting to deliver a premier mortgage experience.

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