J. Scott Harris – MortgageXperts.com

Call us 1st to AVOID mortgage problems, Call us 2nd to SOLVE them! We close loans every day that Banks would not, or could not approve. NMLS # 375517 – Mobile 214-435-8825

J. Scott Harris – MortgageXperts.com - Call us 1st to AVOID mortgage problems, Call us 2nd to SOLVE them!  We close loans every day that Banks would not, or could not approve. NMLS # 375517  – Mobile 214-435-8825

Student debt is not roadblock to homebuying… yet

Excessive levels of student debt repayments are not acting as a roadblock to housing for first-time homeowners, at least not yet.

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According to a new report on student debt and housing from Capital Economics, while many believe that America’s outrageously growing amount of student debt is holding millennials back from buying a home, calculations suggest that they are wrong.

According to the National Association of Realtors, the average first-time buyer (FTB) is 31 years old. Assuming that they graduated in 2005 or 2006, when the average student loan debt was around $16,000, and that they found a job within a year or so of leaving college, they are likely to have already paid off most of the debt under the standard terms of a 10-year federal student loan.

And even in the case that they have no progress in paying down their loans, at current interest rates, a 30-year mortgage with a 3.5% down-payment (the minimum permitted by the FHA) on a home worth $178,000 (the average price for a FTB home) generates monthly repayments of around $940 including fees. Add in a $16,000 student loan or, conservatively, two loans for a couple, and that rises to $1,300 per month.

So here’s the math.

Since the maximum permitted debt-to-income ratio for FHA loans is 43%, this implies that the average FTB household needs a gross income of at least $36,280 to qualify for a FHA mortgage on an average priced home.

And according to the Census Bureau’s Current Population Survey, the median income for households headed by someone aged 30 to 34 is $58,500, which is well above the calculated threshold suggesting that student debt repayments should not be a major constraint on FTB demand.

This is doesn’t mean that student debt won’t eventually be an issue.

The stock of student debt has tripled since 2005 to reach almost $1.2 trillion. That has pushed the average debt per student from around $16,000 to $27,000.

Here’s the Bottom Line:
Gold Financial does not count Deferred Student loans in a buyer’s ratios.
We can usually qualify a buyer for much larger FHA loan than other lenders allow.

Call us 1st to AVOID mortgage problems,
Call us 2nd to SOLVE them!

We close loans every day that Banks would not,
or could not approve.

JscottHarris

J. Scott Harris
Vice President – MORTGAGE MIRACLE WORKING
NMLS #375517
Gold Financial Services, Inc.

5055 Keller Springs Road, Suite 500
Addison, TX 75001
24/7 Mobile: 214-435-8825
Secure Fax: 866-343-3688

Apply Online – www.MortgageXperts.com

Gold Financial Services, Inc.
is a division of Amcap Mortgage, Ltd. NMLS# 129122

 

 

Category: Mortgage News