Can I Get a Mortgage If Student Loans are Defaulted?

“Can I get a mortgage if student loans are defaulted?” The answer would be yes. But it will be very hard of a process. Student loans are probably one of the first loans an individual had in his entire life. And because this type of loan is usually acquired during a person youth, the record would most likely show an inconsistent interval of payments, with a number of delayed ones. The worst that could’ve happened is having a defaulted student loan on your record. But how does this affect your application for a mortgage loan in the future? Let us examine this in the succeeding paragraphs.

Credit is Everything

When applying for any form of a loan, your eligible for such loans should be established before it is granted. One of the determinants of an individual’s eligibility is his credit history. This includes a record that pertains to previous loans such as student loans and car loans. Government agencies exist to keep records of such scores. When you are able to pay a credit debt 30 days late of its due date, credit companies will notify these agencies which will note this in your record in their comprehensive database. Once you have accumulated low or subnormal scores, you are considered by future lenders as a potentially risky borrower. Not only will a defaulted student loan lower your scores in your records, but it will also tell lenders that you are unable to manage your finances well.

In the Mind of Future Lenders

If you apply for any form of a mortgage loan, guidelines for eligibility require you to go under strict and stringent scrutiny. Your credit history will be assessed in order to identify your past credit behaviors. To be able to have a more positive impression, your record should reflect an excellent and clean credit history. Certainly having a defaulted student loan is not one way to achieve this. When you have such it implies that you were unable to manage your finances well in the past. After much consideration, individuals with cases like this are rarely given approval for the mortgage loan they are applying.

What Can Still be Done

There are existing remedies for such dilemmas, however. Consider the following when planning to secure a mortgage loan with a history of defaulted student loans.

  • Get as high as 20% as a down payment. If your financial conditions have improved in recent years and you are able to do so, you will have a big chance of having a loan approved. Additionally, you will have reduced monthly payments if your down payment is this big.
  • Since a student loan default is a thing of the past, it is important that you are able to provide documents that can support that you are more capable of handling such this time around. It is recommended that you provide the lenders with proof that your income can support your purchase.
  • If the student loan was more than 5 years ago, you have great chances of having your loan approved for as long as you observe the previous point. This is because a default acquired beyond five years ago can be negligible.