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It’s no secret that student loans can make buying a home a challenge. But what exactly is the problem, and how can buyers overcome it?

The problem is that student loans can be included in the buyer’s debt-to-income ratio, or DTI, defined as:

The percentage of monthly income that is spent on debt payments, including mortgages, student loans, auto loans, minimum credit card payments and child support.

An example: Jessie and Pat together earn $5,000 a month. Their total debt payments are $1,600 a month. Their debt-to-income ratio is 32 percent ($1,600 divided by $5,000).

This ratio is one factor lenders use to decide whether a buyer can afford a mortgage payment. Generally, mortgage lenders prefer a debt-to-income ratio of 36 percent or less. In some situations, lenders will approve mortgages with higher debt-to-income ratios.

Hard to nail down: The house payment is an important part of DTI. Because the house payment is affected by house price, property taxes and interest rate, a borrower’s DTI is a moving target.

“The misconception is that there is a magical dollar amount that somebody will be qualified for, and that’s not the case. What the banks actually underwrite to is what the monthly payment is,” explains Jay Dacey, a mortgage broker at Metropolitan Financial Mortgage Co. in Minneapolis.

DTI and student loans: Whether student loans are included in DTI depends on the type of loan and whether the payments are current or have been deferred.

If the buyer applies for a conventional mortgage or VA loan, guaranteed by the U.S. Department of Veterans Affairs, any student loans will be included, even if the payments have been deferred, explains David Krichmar, a mortgage banker at Core Lending in Conroe, Texas.

If the buyer applies for an FHA loan, insured by the Federal Housing Administration, any student loans will be included unless the payments have been deferred for at least 12 months. In that case, the payments can be excluded from DTI.

DTI fixes: There are three ways to overcome a DTI difficulty: Reduce debt, increase income or decrease the target mortgage payment.

Reduce debt. Some lenders will remove an installment or closed-end loan, such as a car payment, from DTI if the loan will be paid off within 10 or fewer payments. Dacey says if a buyer pays off enough of a loan to reduce the balance to 10 or fewer payments, the DTI can benefit.

Reducing or paying off credit card debt can help, too, although the 10-month rule doesn’t apply because a credit card is revolving or open-ended debt.

Another DTI improvement strategy is to pay off the student loans with a private loan, perhaps from a family member, at a lower interest rate or with a longer repayment term. The private loan must be disclosed to the lender.

Moving debt around: Buyers who are married and don’t live in a community property state might be able to reconfigure the income and liabilities to overcome a DTI hurdle.

“Let’s say the husband stays home with the kids and (the couple) has a joint auto loan that is truly the dad’s truck. I’ve seen people refinance out of their existing auto loan and put it into the (name of the) spouse who doesn’t have the income,” Dacey says.

The income-earning spouse then applies for a mortgage without the debt-burdened spouse.

Increasing income: The general rule of thumb is that income must be documented for two years to be included in DTI. But Krichmar says a buyer’s college history can make up almost all of that two-year time frame, and a new job in the same field isn’t necessarily a negative, especially if it comes with a higher salary.

“That income could be used to qualify as soon as you have 30 days of pay stubs,” he says.

Different rules apply to commissions, bonuses, self-employment income and hobby businesses.

Decreasing the mortgage payment: It may seem counterintuitive, but buying a house instead of a condominium can improve a buyer’s DTI because homeowners association dues are included in a condo payment but not a house payment.

“Somebody might qualify to buy a $150,000 house but not a $150,000 condo because the association fees might be a little bit too high,” Dacey says.

Buying a home in an area with lower property taxes or paying an upfront fee to decrease the mortgage interest rate also could help. The upfront fee is known as discount points or a buy-down.

It’s tough out there: If none of those solutions works for you, you’re not alone.

Only 33 percent of 2014 homebuyers were first-time purchasers, according to a survey released by the National Association of Realtors. That was the lowest proportion since 1987.

What’s more, 23 percent of those first-time buyers said saving for a down payment was difficult and 57 percent of that group cited — you guessed it — student loans as a factor.

Real estate brokers are concerned about this issue, says Wendy English, sales manager at Century 21 Commonwealth in Medfield, Mass.

“Setting aside for the down payment and closing costs is difficult because their money is going toward living expenses and paying student loan debt,” English says. “They might want to buy, but they have that burden of the student loans.”

12,563 rubber duckies: One way to understand the impact is to try the make-your-own-infographic function at the website of the Young Invincibles, an advocacy organization in Washington, D.C.

Plug in, say, $25,000 of student loan debt and you’ll discover that’s equivalent to about 60 percent of the average down payment to buy a home. It’s also equal to about 2.4 years of average rent payments, 676 toaster ovens or 12,563 rubber duckies.

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