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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.

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We close loans every day that Banks would not,
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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