by Rob Kelly, LRA Owner & Managing Broker
Are you one of the more than 1.3 million students graduating from college or secondary education with debt? The numbers of students over burdened with student debt seem to be keeping pace with the rapid rise of tuition and the other expenses. According to the Institute of College Access and Success, "Graduates with student loan debt is up from 1.1 million in 2008 and 0.9 million in 2004. In 2012, 66% of graduates from public colleges had student loans and 75% of graduates from private nonprofit colleges had student loans."
Since we are diving into the statistics, here's another sobering fact. According to a 2017 survey from the National Association of REALTORs (NAR), "Eighty percent of millennials don't own a home." Of those who'd don't own a home, 83% say student loan debt is holding them back. A high debt load can hurt mortgage seekers because a large component of a mortgage loan approval process is an applicant's income to debt ratio. The higher someone's monthly debt load, the harder it is (typically) to obtain a mortgage. But don't despair! There are some things you can do to improve your financial profile in the eyes of a mortgage lender including some advice from Robin Saks Frankel of Bankrate.com.
- Pay Down your Credit Cards - this will help you improve your credit score and will improve your debt to income ratio, both important elements to have under control when applying for a mortgage. If you don't have the cash to pay down your credit cards, then consider consolidating your credit card debt to get a lower monthly payment due. Lenders look at your monthly debt obligations, not your total sum of debt.
- Explore Government Debt - it may be worthwhile to seek help from government programs if you have federal student loans. There may be income driven repayment plans, which can reduce your monthly payments, thus lowering the debt to income ratio.
- Understand New Home Ownership Policies - last year, Fannie Mae, a leading source of financing for mortgage lenders in the United States, unveiled three new policies to help home ownership become a reality for graduates with student debts.
- Debt Paid by Others - excludes any of your consumer debt paid by parents, grandparents, an employer, for example, or any third party.
- Student Debt Payment Calculation - allows lenders to accept loan payments on credit reports, likely increasing credit scores.
- Student Loan Cash-Out Refinance - for those with student debt, who are home owners already, this policy allows for debtors to pay off high interest rate debt while refinancing to a lower mortgage rate.
- Loan Consolidation Options - find out if it makes sense to consolidate your loans here.
If you are starting your home purchasing plans or preparing your home for sale and have questions about the process, our team would be happy to help you. If you would like to see housing data for Boulder County, we have seasonal statistics to check out in such as "Days on Market", "Total Inventory" and "Newly Listed Homes" here. LRA tracks all these market statistics for Single Family Homes (SFH) for most of neighboring towns on a monthly basis, including Louisville, Lafayette, Superior and Erie. At Louisville Realty Associates, we have the experience, energy and depth of knowledge to help you list your home for the best price. You can reach our team anytime at email@example.com.
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