Applying for a mortgage loan is akin to putting all of your financial cards on the table. Because the amount being borrowed is so high (in most cases), lenders will scrutinize all of your money decisions with a fine tooth comb. With that being said, it is best to wait to apply for a mortgage loan until such a time when your other financial obligations are low and your
credit score is good.
However, everyone knows that life doesn't always go as planned, and
many millions of Americans are finding themselves paying off student loan debt
years, sometimes
decades after they have finished college. Many of these people may have in fact defaulted on their student loans, which can result in a legal judgment from the court.
Understandably, lenders are very wary of giving a loan to someone who has already defaulted on a loan in the past. They'd rather not take the risk of losing big-time money, and may pass you over for the next borrower 'standing in line.'
So, what is a person to do if they are working hard to make good on an old student loan judgment? Must they wait until their loan is 100% paid off to pursue their dream of owning a home?
The real answer to this question is "maybe." While that answer may not seem very encouraging, it's better than an outright "no." Lenders are going to look at more than just an outstanding student loan judgment (even if you are currently making steady payments on that loan via wage garnishment).
Another big factor that mortgage lenders are going to take into account is your overall credit score and your credit report. If you haven't taken a look at your credit report recently, take advantage of the free report available to you at
annualcreditreport.com. If you want to know your actual score, you will simply have to pay an extra $10.
If your score is at least fair, (above 630), that is proof that your student loan has not put a permanent albatross on your credit score, and moving ahead with applying for a mortgage loan is definitely within the scope of reasonable actions for you at this time.
If, on the other hand, your credit score is less than 630, you probably won't get approved for a mortgage loan immediately, but you
do have several options to help yourself move toward that goal.
First, make contact with your student loan lender(s). By reaching out to them personally, you'll likely have a better chance of getting out of student loan debt much faster than you will on your current payment schedule. Many lenders have a rehabilitation program that helps debtors get back on track. If your lender is not amenable to speaking with you or negotiating with you, contact a New Jersey attorney who has experience dealing with both
student loan debt and real estate. The right NJ attorney can negotiate your outstanding debts down to a much more manageable level - so much so that the fees associated with hiring an attorney will seem like
a drop in the bucket.
Another thing you can do is apply for three secured credit cards and begin using them as soon as you receive them in the mail. Pay off the balances consistently every month for the next six months. This action alone will boost your credit score and help put you in position to get that mortgage loan, and get into the home of your dreams.
To get additional information and help negotiating your student loan debt,
contact our office now for a free consultation.
(732) 852-7295
Image credit: Chie