With the economy in shambles and possibly just beginning to recover from disaster, housing prices have seen a fall unlike any other in our lifetimes.  Utah mortgage companies are also charging rates at once-in-a-lifetime lows.

Despite the fact that, financially speaking, homes are easier to buy than ever, young people are still having a very difficult time qualifying for a mortgage.  Why?  Not only are young people contending with a thin jobs market, but they’ve had to deal with escalating student loan costs too.  Many students graduate with student loan debt far beyond what they can afford to pay.

Fortunately, Utah mortgage lenders don’t necessarily look at student debt as a bad thing.  While having student loans to pay will ultimately reduce the amount of the mortgage you’ll end up receiving, they won’t completely ruin any chance you had at receiving a mortgage.

Here is how Utah mortgage lenders factor your student loan debt into the amount of a mortgage they’re willing to lend you:

1. They follow the 28/36 rule.  The 28/36 rule simply means that, at most, 28% of your gross monthly income should go towards your mortgage payment, property taxes, and insurance.  Your total debt payments should never exceed 36% of your gross income.
2. When applying for a Utah mortgage, lenders also take a hard look at your credit score. Your student loans do factor into your credit score, however, they don’t impact it as negatively as other forms of debt, such as credit card debt.

   The reason for that is your FICO score, the credit score used by most Utah mortgage companies, places debt into two categories: installment loans and revolving loans.

   Student loans are classified as “installment loans,” which simply means that loan money doesn’t impact your credit score as negatively as revolving loans.

What You Should Do About Your Student Loans

Unfortunately, many students either take on too much student loan debt in the first place, or simply don’t understand why it’s important to begin paying off their student loans.

Whatever you decide to do, be sure to take action and stay in touch with your student loan issuer.  If you’re working a job well below your qualifications and income requirements, talk with your student loan company about deferment or lowering the payments so they are more affordable based on your income.

Whether you have private or government-funded student loans, loan issuers are typically willing to work with you in creating an affordable repayment plan.  Government loan issuers are particularly willing to help you out.

One reason you want to begin paying back your student loans, rather than ignoring them, is that missed payments can appear on your credit report, affecting your ability to receive a mortgage or other loans in the future.

A second reason you will want to begin paying back your student loans as early as possible is that you’ll be able to receive a larger mortgage when you’re ready for one.

Remember how Utah mortgage lenders look for maximum debt payments of 36% of your gross income or less?  If you have already paid down your student loans a little by the time you’re applying for a mortgage, you’re already putting yourself in a better position to receive a higher mortgage!

Being Proactive Helps you a Ton in the Long-Run

Keep in mind the worst thing you can do is to ignore your student loans and do nothing at all.  By being proactive when handling your student loans, you are putting yourself in a much better financial position not just for receiving a mortgage, but for the rest of life as well.