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As adults, we tend to bounce from one big financial quest to the next. We need money to buy a car, to go to college, to own a home, which usually means we have to keep asking for loans.

You’d expect it would get easier as you go, but sometimes it doesn’t, especially if you’ve made mistakes along the way. Unfortunately, your missteps could keep you from qualifying for a mortgage—the Mount Everest of money-borrowing pursuits. If you’ve buried yourself in credit card and other debt, it’s crucial to get clear before you can move forward.

Consolidating Credit Card Debt Before a Mortgage Approval

Your credit card debt and mortgage approval can sometimes go hand in hand. Mortgage lenders want to know that you can afford to pay back the loan they’re offering, so they’re going to be curious about what you already owe others. While every lender is different, they’ll typically look at what you earn every month versus what you’ll be paying for your home and other debt obligations. Our home buyer’s guide is an excellent resource for first-time home buyers or existing homeowners looking to brush up on the home buying process.

Even if you have a good credit score and a debt-to-income ratio of 43% or less, high credit card debt payments could still make it difficult for you to pay a mortgage.

Credit cards typically come with a high interest rate and as long as you don’t pay your balance off in full every payment cycle, interest can continuously compound.

Taking out a debt consolidation loan is a way to help break the debt cycle. While you’ll then have to take out a personal loan, the interest rate may be lower than your credit cards, and personal loans usually offer fixed interest rates.

Think of it as your borrowing base camp—a personal loan can help you catch your breath and get your finances in order before you move on in your quest for a mortgage.

Recommended: Home Affordability Calculator

Using a Personal Loan To Consolidate Debt

Let’s get into more detail about how it all works:

You’ll combine the credit card debt into one manageable bill with a single payment due date. That means you’ll no longer have to worry about multiple payment due dates (or what will happen to the interest rates attached to those accounts if you don’t make your payments on time).

You may also qualify for a lower interest rate. The average interest rate on credit cards hovers around 16%, which is pretty hefty. Or maybe you accepted a higher rate on a new card a while ago when you needed it to build your credit and never got the rate adjusted. If you have a good credit record, a consistent job history, and a solid income, you may be able to bring your interest rate down with a personal loan.

Those high interest rates might be the very reason you got into trouble in the first place. Perhaps you aren’t an over-spender or maybe you just got into the habit of paying the minimum on your credit cards each month, figuring you’d catch up “someday.”

And it wasn’t until you started thinking about purchasing a home that you realized you’re on thin ice. With a lower interest rate and just one bill, you could help set yourself up for success with a better chance of staying on top of your debt.

Having the balance of one or more of your credit cards near the credit limit may negatively affect your credit score. Credit utilization is one of five major factors that help determine your credit score (along with payment history, the age of the credit, credit mix, and the number of recent credit inquiries).

Credit utilization is a comparison between the amount of credit you have available to you (your account limits) and what you’re actually using (your balances). If your credit utilization is high, a lender might see you as more of a risk, and the ratio can impact up to 30% of your credit score . Paying off your credit cards —and keeping them paid off—may help you boost your credit score.

Being on firmer footing with debt also could boost your savings sense. You’re probably going to want to get home-loan-ready one careful step at a time, and knowing you’re doing something about your debt might inspire you to make other savvy moves, like spending less and saving more.

If you reduce your monthly debt payments with a consolidation loan, you could put that extra money toward the down payment you’ll need for your new home. And putting down more up front will ultimately mean you own more of your house—and have a smaller mortgage.

Using a personal loan to lower the amount you’re required to pay on your debt each month may help improve that statistic lenders lean so hard on: the debt-to-income ratio.

Lenders may conclude that those with higher debt-to-income could have more difficulty paying their mortgage. You may seem like a safer bet in the eyes of a lender with a lower debt-to-income ratio.

Understandably, they just don’t want the risk, so why give them an excuse to turn you down? Your consolidation loan won’t magically make your debt disappear, but by paying regularly on your personal loan, you can get a better grip on your debt load and eventually improve your credit profile.

You might find you don’t even need those credit cards anymore—at least not as many or not so often. Maybe when you were starting out on your own, you used credit to get by when times were tight. Now that you’re earning more money and your finances are more in order, that’s hopefully not true anymore.

You might find yourself chopping up some of those extra cards. After all, if your personal loan comes with a lower monthly payment, you’ll likely have more cash in your pocket to pay for the small stuff.

Other Options For Knocking Down Debt

If you think you have the resources and discipline to knock down your credit card balances on your own within six months or so, you probably don’t need to bother with a loan.

Or you might want to look into using a balance transfer card—that is, if you think you can focus on paying it off within the required timeline to take advantage of the low interest rate…and you can resist the temptation to keep charging.

But, if it feels as though your debt is becoming a slippery slope, and consolidation would help you set up a new and better payment structure for getting rid of it, you may want to consider a personal loan.

Consolidating debt before buying a home can be a wise first step. And if all goes as planned, when you’re ready to purchase that home, you could decide to apply for a mortgage loan through SoFi.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.

SOPL18133

Millions of students across the U.S. take out student loans every year as a way to finance their college education. Student loan debt in America is at an all-time high, reaching nearly $1.5 trillion in 2018. About 70% of college students graduated in 2017 with student loan debt that was expected to average $38,000 .

After years of record low interest rates, 2018 marks the second year in a row that interest rates on federal student loans have increased. Interest rates on federal student loans for undergraduates have increased from 4.45% to 5.05% for the 2018 to 2019 academic year . This student loan rate increase of 0.595% applies for any new loans taken out on or after July 1, 2018.

Student loan interest rates also increased for graduate students—rising from 6% to 6.6%. Rates on PLUS loans, which are available to parents and graduate students, increased from 7% to 7.6%.

How Does Student Loan Interest Increase on Federal Loans?

Since 2013, the interest rate on federal student loans has been set annually by Congress based on the 10-year treasury note . Each year, the new rates take effect on July 1 and apply to loans taken out for the following academic year. Under this formula, rates can increase, decrease, or remain the same.

Federal student loans have fixed interest rates, so the new rate hikes only affect new loans taken out in the 2018 to 2019 school year. Because many students rely on federal loans to pay for college every year, the increases could still result in borrowers paying more money each month, even though the interest rates on federal loans are fixed.

Assuming a 10-year repayment plan, the latest interest rate hike in July 2018 will increase monthly loan payments by about 2.8% . And although the interest rate on federal education loans remains the same over the life the loan, when a student takes out an education loan for the next school year, that loan might have a higher interest rate. Higher interest rates on student loans lead to more debt, which can make it harder for graduates to pay off their student loans.

In an effort to keep the interest rates on student loans from skyrocketing, Congress has set limits on how high interest rates can go . Undergraduate loans are capped at 8.25%, graduate loans can never go higher than 9.5%, and the limit on parental loans is capped at 10.5%.

How Does Student Loan Interest Increase on Private Loans?

If you have private student loans, the federal rate hikes won’t directly affect your loans. Most private lenders look at your credit history and income, among a few other factors to determine if they will lend to you and what rate you will qualify for. Many private lenders offer fixed and variable rates for student loans.

Often variable rate loans are tied to the one-month LIBOR, a common global index that reflects short-term interest rates and can change monthly. The one-month LIBOR rate generally rises and falls in small increments each month. As the LIBOR fluctuates, the variable rate on your loan will fluctuate as well. For example, in 2017, variable and fixed interest rates on private student loans rose nearly a point.

Private lenders generally add a margin to the rate which is determined by your credit score or the credit score of your co-signer if you have one. Depending on your lender, variable rates can change monthly, quarterly, or annually.

Even if the variable interest rate on your loan rises, you could still be paying less money in interest over the life of the loan if you pay it off in a short period of time. (Because paying it off quickly means there is less time for interest to accrue!)

On the other hand, if rising interest rates are causing your student loan anxiety to increase as well, you could consider refinancing your variable rate student loans to a fixed interest rate.

Protecting Yourself From Student Loan Rate Increases

When you refinance your student loans, you essentially take out a new loan with a new (hopefully lower) interest rate. That new loan is used to pay off your existing loans.

Refinancing your student loans can allow you to adjust your repayment timeline by shortening or extending the term length. These options can change the total amount of interest you pay over the life of the loan and your monthly loan payment, too.

If you have a mix of federal and private loans and you want to get a new interest rate, you won’t be able to consolidate your loans with the government. At SoFi, you can consolidate your federal and private loans through refinancing.

Keep in mind that if you do refinance with a private lender, your loan will no longer have federal protections like income-driven repayment plans or Public Service Loan Forgiveness.

But if you don’t anticipate needing these programs, refinancing with a private lender might result in a lower interest rate.

With SoFi, there are no application fees or prepayment penalties. And you’ll have the opportunity to choose between a fixed rate loan or a variable rate loan. Both options offer strong opportunities for borrowers to reduce the money they spend on interest depending on a variety of factors such as the total amount of the loan and the overall length of the loan.

To get an idea of how refinancing and the different interest rate options could impact your loan, take advantage of SoFi’s easy-to-use student loan refinance calculator.

SoFi is a leader is the student loan space—offering both private student loans to help pay your way through school, or refinancing options to help you pay off your loans faster.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOSL18168

Paying off your student loans can feel like a grueling journey, especially if you have a lot of it. And there’s a lot of student loan debt out there—$1.5 trillion to be exact .

It’s becoming clear just how much student debt can have a negative impact on the psyche of the student debt holder. In a survey conducted by SoFi, 83% of respondents felt like they couldn’t relax due to their student loans, and 50% felt that student loan debt has made them feel depressed.

More than a third have reported losing sleep due to student loan debt, and plenty of others say that it’s caused them to miss out on opportunities to travel, practice self-care, and make major life decisions.

If you’re in the throes of student loan debt repayment, you should know that there’s hope: Catie Gould and Veronica Scafe, two SoFi members, show us that it can be done. Not only did they each pay off their nearly $100,000 in respective students loans, but did so in about four years—significantly faster than their original loan terms.

It is important to note that these results may not be typical of every person paying down student loans. Below, these two members share their student debt journeys as well as their tips to help pay off student loans.

Meet Catie Gould and Veronica Scafe, SoFi Members

If you’ve got student loans and are looking for inspiration to get rid of them once and for all, Catie Gould and Veronica Scafe are your people. Both paid down nearly $100,000 in student loan debt.

Catie Gould paid off her student loans in just over four years—an impressive feat considering she graduated with around $91,000 in student debt from her dual degrees in material science and mechanical engineering.

Veronica Scafe found herself in a similar situation after graduating with $99,800 in student loans from obtaining her Doctor of Pharmacy degree. Even though Scafe had only expected to leave graduate school with $80,000 in loans, she was able to pay off the balance in an incredible three years and eleven months.

Their Personal Strategies For Paying Off Student Loans

Right out of school, Gould and Scafe deployed similar strategies for paying off their student loans fast; they both worked hard at keeping their expenses low, even with their new, higher salaries.

When Gould graduated from school, she avoided “lifestyle inflation” even though she was making more money than she ever had before. “Not very much changed for me after graduating. I am a saver by nature. I kept driving my old car, living with roommates, shopping at thrift stores, taking local vacations.”

And Gould didn’t stop there. “I bought a bicycle to get around town, tried gardening, and cooked my own food most of the time. I said no to plenty of things, but most never felt like a sacrifice.”

It helped Gould that she didn’t have expensive tastes to begin with: “Festivals were a big thing I never knew about. I was shocked that people pay $300+ to go to weekend music festivals.”

Scafe recounts an experience similar to Gould’s. She and her husband “never expanded our lifestyle to fit our salary so we never had to make cuts.” Scafe added, “We live pretty frugally. We have a modest home. We cooked most of our meals at home and took leftovers for lunch the next day.”

Just as keeping expenses low was an important tactic for both women, so was making additional payments towards their student loans. Neither wanted the emotional burden of paying back loans for longer than they had to, nor did they like seeing so much of their loan payments go towards interest payments and not the principal.

Simply having a long, hard look at how much you’re spending in interest payments every day, week, or month, may be the motivation you need to pay your loans off faster than the standard ten-year repayment schedule.

“I sometimes calculated how much interest I owed every morning just for waking up,” says Gould. From this exercise, she noticed that the daily interest charges on her student loans cost her “more than eating out every day, which I considered pretty indulgent,” and this motivated her to take action, and fast.

Gould and Scafe also refinanced their student loans, which provided them both the extra boost they needed to pay their loans back on such short timelines. By refinancing and qualifying for lower rates, more of each payment could be applied to the loan’s principal and not just interest.

What pushed them to pull the trigger on refinancing?

When Gould started her first corporate engineering job, the company was in the midst of layoffs. Luckily, she kept her job, but she says that “the layoff had a huge impact on me.” This experience at work pushed her to explore even more options for lowering her student loan bill.

The concern of how she’d make payments if something were to happen to her job, along with interest rates that she felt were far too high—some of them at 8.75%—inspired her to tackle her debt through extra payments and refinancing.

Gould refinanced around $36,000 of her debt through SoFi. She said, “Getting out of a higher interest rate was really helpful to pay down my remaining student loan balance. I feel a lot more in control of my future and how I chose to spend my time. It’s steered my life in a direction I never anticipated.”

Scafe also knew the feeling of wanting her loans long gone, and fast. “I obsessed over them and I think that’s what motivated me to get rid of them ASAP.” Having multiple loan payments scattered throughout her month was a nuisance.

“I refinanced to lower my interest rate,” she says, but also desperately wanted to have only one monthly payment. Paying down multiple loans faster than their scheduled repayment terms was a logistical hassle, and required significant manual maneuvering. “It got really frustrating.”

Both women refinanced their loans with SoFi, lowering their interest rates and saving them money on interest while consolidating their multiple loans—both federal and private—into one loan with one easy payment.

Tips to Help Pay Off Student Loans Early

“Tracking your spending is a must,” says Gould. She used Mint to track her spending, though there are many methods of doing so. The important thing, says Gould, is to do it. “The difference between months I looked at my budget frequently and months I didn’t was about $300 to $500 of savings, just from being more aware.” And putting those savings towards a student loan payment seriously expedited her loan payoff journey.

When it comes to spending money, try to cut whatever doesn’t bring you true joy. “There is always something forgettable that you are spending money on every month that you can cut.” For Gould, one of these things was dining out. For you, it could be something different, but the lesson here is to identify what really doesn’t produce joy for you, and ruthlessly eliminate it. Spend on only what you love.

“There is no way you can cut out all your expenses, and you need to let yourself have a little leeway to feel like you are living a great life. Some treats I got myself were evening classes in things I found interesting.

I took calligraphy, pottery, Arabic, essay writing. I also have some nice camping gear. I always equated these extra things to lunches—a $10 expense that I wouldn’t miss.”

Scafe, on the other hand, extols the virtues of paying yourself first. Whether you’re paying off loans on an expedited schedule or saving up an emergency fund, it’s wise to spend what is left over after saving and not vice versa.

While you should always keep a buffer in your checking account, too much cash lying around could be just asking to be spent. You can move it towards your loans or a savings account as soon as payday hits instead.

For both women, seeing the light at the end of the tunnel was crucial to their perseverance. They stuck with it, even when it felt like student debt freedom would never become a reality.

For Scafe, having her debt eliminated has been a big stress relief. Gould says that she feels in control of her future and how she chooses to spend her time, and that nothing compares to the feeling of paying off her student debt. And while neither claim that the process was easy, or entirely possible for many on their relatively short timelines, both believe that it was totally worth it.

If you have student loans like Scafe and Gould, keep pushing to reach your goal of being debt free. You can use our student loan payoff calculator to get an idea of when your loan payoff date could be, and it’s never too late to start putting strategies in place to help accelerate your loan payoff—even if it’s just a little at a time.

Also, you can consider refinancing your student loans with SoFi to potentially lower your interest rate and get a shorter term, and therefore help to expedite your own loan payoff journey.

Disclaimer: The savings and experiences of members herein may not be representative of the experiences of all members. Savings and experiences are not guaranteed and will vary based on your unique situation and other factors.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

SOSL18113

You did it. All those countless hours devoted to classes, late-night study sessions, and college entrance exams have paid off. That’s right, you’re going to college!

Chances are you’ve been working toward this goal for most of your life, so you deserve a major pat on the back. Bask in this moment, because once that post-acceptance glow wears off, you may be faced with some big decisions that you aren’t all that eager to make. Namely, how to be a great student loan borrower.

No matter how much you plan or how many pennies you and your family pinch, these days it’s pretty difficult to save enough to pay for school without the assistance of loans. If it provides any comfort, know you aren’t alone when it comes to facing large amounts of student loan debt once you graduate.

The average student borrower has about $37,000 in loans and as of August 2018, there were 44 million student loan borrowers in the United States. Luckily, there are ways you can prepare to manage your future student loan debt and receive some help along the way.

Understand the Cost of Your Education

When choosing where to study, you’ll have to make a lot of important decisions. Do you want to attend a liberal arts school or one that focuses on S.T.E.M. subjects? Would going to a university in a big city help you find that dream internship or would you better thrive by staying closer to home?

In an ideal world, you would make your education decisions based off many factors, but cost wouldn’t be one of them. Unfortunately, most soon-to-be college students need to consider the cost of their degree and living expenses before choosing which school to attend.

It’s not a factor to consider lightly. Before you make a final decision, you need to sit down and map out what each of your education options (including living arrangements) could cost you.

That calculation should include interest as well as costs like textbooks, meal plans, parking, sundries, and more. Most universities will map out estimates of school supplies, dorm fees, and other expenses students should anticipate while enrolled. If you’re planning on traveling for a semester abroad or pledging a fraternity or sorority, you’ll need to account for those expenses as well.

There are also ways you can plan to shorten your time at a costly university in order to keep your loan total lower. One less expensive option to consider is starting at a community college for your lower division coursework. If a community college isn’t the right fit full-time, you can always pick up elective credits at one during the summer for a fraction of the cost a typical private university would charge.

Know Your Student Loan Options

Fortunately, this step isn’t too difficult, as there are really only two overarching types of student loans: federal and private. All federal loans are backed by the federal government. Loans that are considered private are often backed by banks, credit unions, or other private lenders.

You can typically expect private student loans to have higher interest rates than federal loans. Federal student loans have fixed interest rates, meaning the interest rates don’t fluctuate post-graduation, whereas private loan interest rates can sometimes be variable, which means the interest rate can increase (or decrease) in accordance with the market if you choose a variable rate loan.

Federal loans require you to be enrolled in school at least half-time in order to be eligible and don’t require you to pay the loan until after you leave school. In fact, a post-graduation grace period of six months is usually provided to allow time for you to find work and get settled.

Private loans are an avenue that can be utilized if federal loan options have been exhausted. If you do find you don’t receive enough in federal loans in order to cover your tuition and other expenses during school, private loans could be a viable option.

Apply for Aid

Once you’ve decided on a school, your next step will likely be applying for financial aid and scholarships. Begin your financial aid and scholarship search by rounding up all the programs you might be eligible for, and keep track of each application deadline in a spreadsheet, your calendar, or both, so you don’t miss any.

You can also contact the financial aid department of the school you are enrolling in, since their office will likely know the best student loan resources available to you. They’ll most likely be happy to help you in any way that they can through the application processes.

The Department of Education has a great online resource to begin your financial aid search, starting with completing their Free Application for Federal Student Aid (FAFSA®) form, which is required for federal student aid like grants, work-study programs, and federal student loans.

Understand Your Post-Grad Repayment Options

Right now, repaying your student loans is a ways off. But before you sign on to borrow student loans, it helps to know how you’ll pay them back after you graduate.

If you have federal loans, you’ll likely be put on the standard 10-year repayment plan after graduating. If you’d prefer a lower monthly payment, federal loans also offer income-based repayment plans that private student loans don’t. And don’t forget, federal loans also typically come with a six-month grace period.

If you’re in a good financial place after graduation (or after you’ve worked for a few years post-college), student loan refinancing could also be a smart way to repay your loans. Whether you have federal or private loans, refinancing can help consolidate your loans at a potentially lower interest rate.

This new interest rate will be based off of your financial picture when you apply. The lower your interest rate is, the less you’ll spend on your loans. SoFi can refinance both federal and private loans, as well as offer fixed and variable interest rates.

Student loans can get complicated—SoFi is here to help. From helping you finance your education to helping you get out of your college debt, we’ve got you covered.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SOSL18115

Perhaps you’ve found your dream home, or maybe you’re still in the exciting stages of looking for the house you want. In either case, you’re likely thinking about getting a mortgage loan—and you may be wondering if the amount of debt you currently have will become a stumbling block to qualifying for a mortgage.

To qualify for a mortgage, a lender needs to be confident that you can responsibly manage the amount of debt that you’re currently carrying along with a mortgage payment. The formula used to determine that is called a debt-to-income (DTI) ratio.

More specifically, a DTI ratio is the percentage of your qualifying monthly income, before taxes, that is needed to cover ongoing debts. This could include student loan payments, a car payment, credit card payments, and so forth. If the DTI ratio is too high, then a lender may see you as a higher risk.

This post will describe DTI in more detail, including how to calculate yours, what lenders typically like to see, and what might be too much debt to buy a house. We’ll also share strategies to manage your debt and lower your DTI ratio to help you qualify for the house of your dreams.

Understanding How Your DTI Ratio Can Affect Your Mortgage Options

The DTI formula is pretty simple. First, make a list of all your debts with recurring payments. Then, if you’re a W2 earner, take your pre-tax monthly income and divide your monthly expenses by this amount. That percentage is your DTI ratio .

Note that, with a mortgage, to calculate your DTI ratio, you’ll need to have a reasonable estimate of monthly property taxes on the home, insurance (homeowners, for sure, and PMI and flood insurance, if applicable), and HOA dues, if applicable. Even if you wouldn’t necessarily pay those bills on a monthly basis, you’ll need the bill broken down into a monthly amount for DTI calculation purposes. (And remember these are just examples. Your actual DTI, as calculated by a lending professional, may differ.)

If your debt-to-income ratio is too high, it can impact the type of mortgage you’ll qualify for. Each mortgage lender will have their own preferred DTI ratio, of course, and lenders can and do make exceptions based on your unique financial situation. Here’s an explainer on desirable debt-to-income ratios from the Consumer Financial Protection Bureau.

Preparing for When You Need a Mortgage

If you know you’ll want to buy a house within, say, the next year or two, it can be beneficial for you to understand how much home you can afford. This will give you time to manage your finances to make getting a mortgage approval easier. Perhaps you can’t pay off all your debt in that time frame, but there are strategic moves to make to position yourself better when mortgage time is upon you. In addition, consider reviewing our home buyers guide to get a better understanding of everything you need to prepare for your mortgage.

First, be careful. There are plenty of debt-related myths, but let’s address two debt-related realities:

1. Having a lot of debt in relation to your income and assets can work against you when applying for a mortgage.
2. If you are consistently late on debt payments, lenders may question your ability to pay your mortgage on time.

Here are a few tips that can help with some of the most common debt challenges:

Student Loan Debt

If you’re looking to take control of your student loan debt, consider refinancing your student loans into one new student loan with a potentially lower interest rate.

This can make paying back your loans easier, because there is just one monthly payment to make. Plus, with a (hopefully) lower interest rate, you can pay back less interest, overall. And, if you’re concerned about your monthly DTI ratio being too high when you go to apply for a mortgage, you may be able to refinance your student loan to a longer term for lower monthly payments, to reduce your current monthly DTI ratio. (Keep in mind, though, that extending your loan term may mean paying more interest over the life of your loan.)

When you refinance at SoFi, you can combine federal loans with private ones, something not many lenders permit. Request a quote online to see what you can save. Note that SoFi does not have any application fees or prepayment penalties.

Credit Card Debt

When you have a significant amount of credit card debt, the monthly payments can negatively impact your DTI ratio.

If you’re concerned about managing credit card debt payments while paying a mortgage, you could even consider focusing your efforts on getting out of credit card debt before you start the homebuying process.

To manage your credit card debt, and ultimately eliminate it, here are a few debt payoff methods to consider

•  The snowball method. List your credit cards from the one with the lowest balance to the one with the highest. Then, focus on paying off the one with the smallest balance first, while still making minimum payments on the rest. When that first card is paid off, focus on the next one on your list and so forth.

•  Tackling high-interest debt first. Using this method, you list your credit cards from the one with the most interest to the one with the least. Then, focus on paying off the credit card with the highest interest while making minimum payments on the rest. Then tackle the next one, and then the next one.

•  Consolidating credit card debt using a personal loan before you apply for a mortgage loan. When you do this, you’ll have just one loan, and personal loans typically have lower interest rates than credit cards (if you qualify). Ideally, keep credit cards open while only using them to the degree that you can pay off in full each billing cycle. And as with all debt payments, make all personal loan payments on time.

By reducing and managing your credit card debt, you can better position yourself for a mortgage loan on the house of your dreams.

Consolidating Your Credit Card Debt with a Personal Loan

Ready to consolidate credit card debt into a personal loan? SoFi makes it fast and easy, and it only takes minutes to apply. Plus, our personal loans have the following perks:

•  Low rates

•  No fees

•  Access to live customer support seven days a week

•  Community benefits; ask about how, if you lose your job, we can temporarily pause your personal loan payments and help you to find a new job

We look forward to helping you achieve your financial goals and dreams. Learn how a personal loan from SoFi can help.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.
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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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