Deferred Student Loans And Debt To Income Calculations
College education has sky rocketed over the years. Today, annual costs for a student to attend a 4 year private university can easily exceed $50,000 per year. State universities can exceed $30,000 per year. This is just undergraduate school. A 4 year bachelor’s degree can cost $200,000 from a private college and $160,000 from a state university. More than 25 million people attend and pursue higher education and over two thirds take out student loans to cover the cost of their education. With the steep cost of college education, many graduates are full of student loans debt when they graduate from college that it takes them years, if not decades to pay them off. A large percentage of college graduates who are in their 30’s and 40’s are still paying on their college student loans. Almost a quarter of those making student loan payments are in their 50’s.
The impact of college graduates graduating from college with hefty student loan debts are affecting their ability to become homeowners. A $200,000 student loan debt is equivalent to a very nice single family home purchase. Over half of home buyers in the United States have student loans on their credit report according to industry experts.
Having student loans can have impact in you qualifying for a mortgage loan.
Student Loans Need To Be Current
If you are intending in applying for a mortgage loan, you need to be current on your student loans. Government loans, especially student loans, cannot be in arrears and cannot be in collections. Student loans need to be current and in good standings. If you intend in filing bankruptcy, student loans cannot be part of the bankruptcy and you will be responsible for the student loans. Student loans cannot be discharged in a bankruptcy.
Student loans can greatly impact a mortgage loan applicant’s debt to income ratios, especially those college graduates who not just have undergraduate student loans but also graduate and/or professional school student loans. Debt to income ratios is when you take your total minimum monthly payments divided by your monthly gross income.
Deferred Student Loans
VA and FHA allows student loan payments to be exempted from the mortgage loan borrower’s debt to income calculations if and only if the student loans have been deferred for at least 12 months. With conventional loans and jumbo mortgage loans, this exemption does not apply.