How Taking Out That Next Student Loan Can Affect Mortgage

This guide covers the risk of taking out that next student loan when getting a mortgage loan approved. If you plan on buying a home, think twice before taking out that next student loan. I worked in the medical field for three years while slowly chipping away at my student loans by making minimal payments. As I slowly trudged through life during these three years, I decided I was not where I wanted to be.

After careful research, I decided the best route for me was to further my education. So I quickly signed up for classes at my local community college. This was a surefire way to avoid additional student loan debt, as the classes were affordable, and I wouldn’t need to take out student loans. This was a smart route, but it was also a long route.

It was very difficult for a full-time parent of four small children. As I struggled through my several hour-long evening classes after working a full eight-hour day, I came to the conclusion that I would need to entertain signing up for a private online college. This enticed me with promises of studying in my pajamas and not commuting. This came with a hefty price tag. This article will discuss taking out that next student loan and how it affects mortgage approval.

Thinking Twice Before Taking Out That Next Student Loan Due To High Costs

After I completed my undergraduate degree in accounting, I was up to $40,000.00 in student loan debt. Student loans are by no means affordable anymore: By no means do I regret my decision to further my education. After college, I worked full-time for a state taxing agency.

As I moved slowly up the ladder, I felt that the competition was getting heavier. Many of my peers had advanced degrees in Accounting and Business. I have always been competitive by nature and felt that I needed to step up my game. So I embarked on another journey. I signed up for classes toward a Master’s Degree. I was very excited about this venture.

I earned my Master’s degree in Accounting in 2009. Although I knew how expensive the program was and what I was getting into financially, I was shocked at my first billing statement from the Department of Education-  $90,000.00. I had to do a double-take because I was hoping maybe there had been an error-just maybe the Department of Education made an error and added an extra zero?  No such luck for me. I immediately called them for an explanation and was quickly brought back down to reality.

Is Taking Out That Next Student Loan Worth It?

I have no regrets about my decision to further my education and taking out many student loans, and I am not complaining. Obtaining an education has opened up many doors for me. But the $90,000.00 mountain of debt doesn’t just go away. To make matters worse, I graduated during one of the greatest economic downfalls in American history.

Before I graduated, I had job offers lined up, and recruiters were contacting me weekly. My joy and thoughts of lucrative job offers sadly disappeared with the swiftly dwindling economy. Here I sat with $90,000.00 in student loan debt and earning nowhere near the income level needed to sustain those $800.00 per month student loan payments.

I quickly sought relief as I struggled to make my student loan payments after my deferments and forbearance plans ran out. As I asked around to my peers, I found that they had no advice to offer. Although many relief programs are available, such as income-based repayment plans, extended loan repayment, and deferments, I found that many programs had income requirements for which I did not qualify. So here I sat with $90,000.00 in student loan debt. It incurred interest at a rapid pace. No promising job offers to get me out of my compromising situation……..stay tuned for Part 2 of my story of how I was able to manage my student loan debt.

Mortgage Guidelines on Student Loans

Having a large substantial loan balance can derail plans in becoming a homeowner. HUD Guidelines on student loans require 0.50% of the outstanding student loan balance to be used as hypothetical debt. HUD no longer exempts deferred student loans from debt-to-income calculations.

What is the one thing in life that is worth investing in? We all ask ourselves that question at some point in our lives. The one answer that came to mind for me was my education. What would provide a better return on my investment than an education? So at 18, I signed up for a 10-month vocational program in medical assisting. I quickly amassed over $10,000.00 in student loan debt.

HUD accepts IBR payments on FHA loans. IBR payments on student loans are allowed on conventional loans. USDA Guidelines on student loans are the same as HUD Guidelines. VA loans permit deferred student loans deferred longer than 12 months to be exempt from debt-to-income calculations. VA requires underwriters to take 5% of the outstanding student loan balance and divide that by 12 months. The resulting figure is used as the borrowers’ student loan payments. It is a hypothetical monthly debt.

About The Author of Taking Out That Next Student Loan

It is a great pleasure to introduce Alexander Thomas Carlucci, our Area Operations Manager at Gustan Cho Associates. Alex is the author of taking out that next student loan. Alex is also a contributing writer for Gustan Cho Associates. Alex Carlucci of Gustan Cho Associates is an expert in all areas of accounting and finance. Mr. Carlucci is not just armed with a Masters’s Degree in Accountancy but has work experience in the private accounting industry.

Alex heads the operations at Gustan Cho Associates. He has a national reputation for being a natural-born leader.  Alex Carlucci helps countless families nationwide realize the dream of homeownership into reality. Every day, borrowers at Gustan Cho Associates, who are homebuyers realize the American dream of homeownership a reality.

If you have any questions about this guide, think twice before taking out that next student loan, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. Alex has extensive expertise in the mortgage industry, and accounting will greatly benefit his fellow loan officers and support staff when qualifying self-employed mortgage borrowers. We are looking forward to the second part of the think twice before taking out that next student loan article and the many more blogs to come by Alex Carlucci of Gustan Cho Associates in the coming days and weeks. Stay Tuned.

This guide on think twice before taking out that next student loan was updated on July 16th, 2023.