Can I Get A House With Student Debt With A Mortgage

0

This ARTICLE On Can I Get A House With Student Debt With A Mortgage Was PUBLISHED On December 2nd, 2019

Can I Get A House With Student Debt With A Mortgage

Many first time home buyers with high student loans often ask the question Can I Get A House With Student Debt.

  • Student debt and auto loans are two of the major barriers homebuyers face
  • Every loan program has its own mortgage guidelines when it comes to student debts
  • With the exception of VA loans, deferred student loans are no longer exempt when it comes to debt to income ratio calculations
  • This holds true even if the student loans are deferred for longer than 12 months
  • However, Gustan Cho Associates are experts in helping homebuyers with high student debts
  • The only loan program that accepts income-based repayment (IBR) are conventional loans
  • The answer to the question Can I Get A House With Student Debt is absolute YES
  • Over 83 percent of potential homebuyers between the ages of 22 to 35 are not buying a home due to student loan debts
  • Educating oneself on student debt guidelines in getting a mortgage is important for first-time homebuyers

In this article, we will cover and discuss the topic of Can I Get A House With Student Debt With A Mortgage.

Can I Get A House With Student Debt And Qualify For A Mortgage

Can I Get A House With Student Debt And Qualify For A Mortgage

Student loan debt is affecting many Americans in realizing the dream of homeownership become a reality.

  • High outstanding student loan debts affect debt to income ratios
  • Closing to 50 million Americans carries student loan debt
  • The average student loan borrower owes an average of $30,000, according data by the Student Loan Hero
  • According to the National Association of Realtors, 20% of those with student loan debt carry an outstanding balance of greater than $100,000
  • Many have their student debts in deferment status

What this means is they do not have to pay on their student loan debts until at a later date when their finances are better. Others may have their student debts in a zero income-based repayment plan.

Data On Consumers With Student Loan Debts

What are Data On Consumers With Student Loan Debts

Michael Gracz of Gustan Cho Associates said the following:

For every 10 percent in student loan debt a person holds, their chance of homeownership drops 1 to 2 percentage points during their first five years after school, according to the Federal Reserve. Student loan debt holders do want to own a home, that’s part of their American dream. It’s just really hard to get there right now. To be sure, people who receive more education also tend to earn higher incomes, possibly offsetting some of the financial distress of student loan debt. You have these competing influences of greater access to education versus reduced ability to buy a home because of student loan debt. Almost one-fifth of people with student debt who apply for a mortgage are denied because of their debt-to-income ratio. The median income for student loan borrowers is $59,746. For borrowers under 30, the average monthly loan payment is $351. The bank looks at it as unsecured debt. With a mortgage, you have the asset of the house. If you stopped paying, you could foreclose on the house. But you can’t go and foreclose on an education. In other words: Banks know you’ll most likely be stuck with your student debt until you pay it off. The mortgage officer wants to see that your overall expenditures on housing and debt — including student loans and car payments — is not more than 36 percent of your income. That’s really going to limit things if you’re only making $50,000 a year.

Student loan debt is one of the biggest hurdles in obtaining a mortgage for borrowers with high debt to income ratios.

FHA And USDA Agency Mortgage Guidelines On Student Loan Debts

What are FHA And USDA Agency Mortgage Guidelines On Student Loan Debts

Both FHA and USDA loans have the same mortgage agency guidelines on student debt.

  • Deferred student loans no longer are exempt on FHA and USDA loans
  • This holds true even though the student loans are in deferment for longer than 12 months
  • Income-based repayment (IBR Repayments) are not allowed on FHA and USDA loans
  • This holds true even though the IBR payment is zero ($0)
  • FHA and USDA require mortgage underwriters to take 1 percent of the outstanding student loan balance and use that figure as a hypothetical monthly payment on DTI calculations
  • This applies to deferred student loans and IBR payments
  • The second option is for the borrower to contact their student loan provider and get a fully monthly amortized payment over an extended term

Most extended-terms on student loans is 25 years. This monthly fully amortized payment needs to be in writing by the student loan provider.

Can I Get A House With Student Debt With A VA Mortgage?

Can I Get A House With Student Debt With A VA Mortgage?

VA loans exempt deferred student loans that are in deferment longer than 12 months.

  • Mortgage underwriters do not have to take a percentage of the outstanding student loan balance and use it as a monthly hypothetical debt on deferred student loans that are in deferment longer than 12 months
  • On non-deferred student loans, mortgage underwriters need to take 5 percent of the outstanding student loan balance and divide that figure by 12
  • The resulting figure will be the figure used as the monthly hypothetical debt when calculating the borrower’s debt to income ratios
  • The second option is for the borrower to contact their student loan provider and get a fully monthly amortized payment over an extended term
  • This figure needs to be in writing by the student loan provider

Fannie Mae And Freddie Mac Student Loan Guidelines

What are Fannie Mae And Freddie Mac Student Loan Guidelines

Conventional loans are the only loan program that allows income-based repayment.

  • Otherwise, 1 percent of the outstanding student loan balance is used as the monthly hypothetical debt by mortgage underwriters when calculating the borrowers’ debt to income ratio
  • The second option is for the borrower to contact their student loan provider and get a fully monthly amortized payment over an extended term
  • This figure needs to be in writing by the student loan provider
  • Defer student loans are not exempt from debt to income ratio calculations on conventional loans

Non-QM loans do exempt deferred student loans as long as the deferment is longer than 12 months.

Leave A Reply

Your email address will not be published.

CALL NOW