Buying A Home With Large Student Loan Debts And High DTI

Advice On Buying A Home With Large Student Loan Debts

Many first-time homebuyers with high student loan debts do not even consider becoming a homeowner. They are under the impression they will never be able to afford a home with large student loan debts. This is absolutely not true. Many homeowners have high student loan debts and can easily afford their housing payments. There are many instances where your mortgage payment on the home you own can be lower than the rental payment. Jammi Cash of Gustan Cho Associates is an expert and seasoned licensed loan originator licensed in over a dozen states. Jammi Cash has helped countless borrowers with high student loans qualify for a mortgage. Jammi said the following:
In the following paragraphs, we will discuss how much money is needed to purchase a home.

Down Payment On A Home Purchase 

Most people who want to purchase a home can easily afford the housing payments on their proposed new home purchase. However, the issue they have it the upfront cash for the down payment and/or closing costs. Many home buyers with high student loan balances normally steer away from the topic of buying a home. This is because they think it is a fantasy and/or dream to be able to even consider buying a home with such large outstanding student loan debts. Many would-be first-time homebuyers often are under the impression they need a 20% down payment to purchase a home. Again, this is not the case. Homebuyers can qualify for a home purchase with as little as 3% to a 5% down payment. VA and USDA loans do not require a down payment requirement. Lenders offer 100% financing on VA and USDA loans. The minimum down payment requirements depends on the particular home mortgage program.

What Other Funds Besides The Down Payment Do I Need To Come Up With To Purchase A Home

All home purchase and refinance mortgage transactions require closing costs for both the homebuyers and home sellers. The good news is most of our borrowers who purchase a home do not need to come up with any funds for closing costs. Does this mean there are no closing costs?

• No. There are closing costs.

However, most of our homebuyers obtaining a mortgage at Gustan Cho Associates get sellers concessions by the home seller to cover all of the buyer’s closing costs. In the event, if the homebuyer is short of closing costs with a seller’s concession, the lender can offer a lender credit in lieu of a higher interest rate and can cover the shortage of closing costs. Closing costs are not a set percentage like the down payment. Closing costs can vary on each home purchase transaction. It is dependent on the type of property, the county the property is located, the loan size, discount points, and other factors.

What are closing costs?
Closing costs are any costs and/or fees that are required in closing the home loan. Again, all closing costs are not the same. It is dependent on the city and/or municipality and state where the property is located.

How Mortgage Lenders View High Student Loan Debts

HUD, the parent of FHA no longer exempts deferred student loans that have been deferred for longer than 12 months from debt to income ratio calculations. FHA loans do not accept income-based repayment (IBR Payments) either. HUD requires mortgage underwriters to take 1.0% of the outstanding student loan balance and use that figure as a hypothetical monthly debt when calculating the borrower’s DTI. If the borrower has a fully amortized monthly payment over an extended term (25 years), mortgage underwriters can use that figure as the borrower’s monthly student loan debt versus the 1.0% of the outstanding student loan balance. FHA student loan guidelines apply to USDA loans. Both FHA and USDA have the same student loan guidelines. The VA does exempt deferred student loans that have been deferred longer than 12 months. VA also accepts fully amortized student loan payments over an extended term. For student loans that have not been deferred for longer than 12 months and/or in an income-based repayment plan, the VA requires the mortgage underwriter to take 5.0% of the outstanding student loan balance and divide it by 12. The resulting figure is the monthly hypothetical debt used in calculating the borrower’s student loan debt. Fannie Mae and Freddie Mac allow income-based repayment (IBR Payments) on conventional loans. This includes zero payment IBR payments.

Buying A Home With Large Student Loan Debts: Examples Of Closing Costs Homebuyers May Encounter

Here are examples of possible closing costs a homebuyer may encounter:

• Prepaid (Escrow for property taxes and/or homeowners insurance)
• Origination charges and discount points
• Processing and Underwriting fees
• Attorney’s fees
• Appraisal fees
• Title charges
• Credit reporting fees
• Rapid rescore charges
• Transfer stamps charged by the village, town, city, and/or county
• Inspection fees
• Any other fees, costs, and/or charges associated with the purchase and closing of the home loan

To qualify for a home mortgage with a national five-star mortgage company licensed in multiple states with no lender overlays, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.