07

- Sep

QUALIFYING FOR A MORTGAGE WHILE DEALING WITH STUDENT LOAN DEBT

According to a 2017 survey from the National Association of Realtors (NAR), 80% of millennials own a home and 83%  have student loan debt that is stopping them from acquiring their own home. The Federal Reserve was quoted to have said that college loan borrowers owe a record $1.4 trillion in student loan debt, making […]

According to a 2017 survey from the National Association of Realtors (NAR), 80% of millennial's own a home and 83%  have student loan debt that is stopping them from acquiring their own home.

The Federal Reserve was quoted to have said that college loan borrowers owe a record $1.4 trillion in student loan debt, making it the second largest form of household debts with over 44 million American currently living with student debt.

If you are in the category of students with a bad loan and you need a house, a home to call your own, one of the things you need to get approved is to prove to a mortgage firm that you are credible; you will also have to make a strong case for yourself. This is because your lender would ask if you can handle a mortgage payment.

Two things your lender would look at are your Front-end and back-end debt to income ratio (also known as DTI) to help determine the amount you can handle for a mortgage loan.

Alright, calm your nerves, having a high student loan debt doesn’t mean that you will not have a good mortgage.

To qualify for mortgages (even if you are dealing with student loan debt), you need to understand some tips and take certain steps.

  • REFINANCE WITH A PRIVATE LENDER

Many students get their loan from the Federal Government, even though that’s true, it’s also possible to refinance with a private lender.

Credit.com recently did a survey that shows that 1/3 of borrowers can snag lower interest rates with a private lender, which could free up some cash for a home loan. You can also refinance and extend the life of your college loan.

The bottom line; A private lender will come in handy to make the dream come true

  • HAVE ENOUGH CASH FOR YOUR DOWN PAYMENT

One sure way is having enough cash to make a 20% down payment on your house. Your chances of getting disqualified by a lender will be slim if you make a down payment of 20%. All this is to show that you are credible. It is believed that this would lower the risk that you’ll default on your loan. 

The bottom line; down payment increases your probability of getting the mortgage

  • CLEAN UP YOUR FINANCIAL PROFILE

Your student loan isn’t really what your lenders look at when they want to loan you money, that’s just one of the things they check to know if you will be a credible creditor or not.

What’s important? Your income and having a good credit score, so when I say you should clean up your financial profile, I mean paying your credit cards and other important debts on time and that also includes your student loans of course.

The bottom line; forget about the student loan and clean up other debts

  • FANNIE MAE’S NEW POLICIES

Fannie Mae is a government-sponsored entity that buys home loans; they (Fannie Mae) recently came up with two new policies that would make it easier for graduates with student loan debt to get their own mortgage.

So, what has really changed?

  • INCOME – BASED REPAYMENTS

Now, lenders are allowed to make it so that that you could be paying far less than 1%, but that is if you participate in federal reduced payment income-based programs. With this, owning your own house would not be as difficult as it was before.

  • ABILITY TO EXCLUDE NON – MORTGAGE DEBT

One policy gives you (the mortgage applicants) the privilege to exclude non-mortgage debt such as your credit cards and student loans paid by another person from your DTII. With this, you will be able to stay below that 36%.

  • GET LOCAL MORTGAGE PROGRAMS SPECIFICALLY FOR COLLEGE GRADUATES

In the United States, nearly all the states offer housing assistance to every college graduate with a student loan debt. So, look for local mortgage programs for a college graduate.

If you can take advantage of these things and take actions too, even with your student debt, qualifying for a mortgage wouldn’t be a problem.

 

The summary; you can always qualify for a mortgage with your student loan once you make use of the tips explained in the article.

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