Student loan debt is an issue affecting nearly 45 million people in the United States. Jobs demand a solid education from prospective employees, putting pressure on people to get a college degree. However, the expensive tuition at many colleges requires students to borrow money in the form of a student loan in order to attend. This debt can follow these students long after they graduate, with the National Association of Realtors reporting that some people owe more than $100,000.
Almost 83% of people aged 22 to 35 say that student loan debt is the main reason they haven’t purchased a home. Student loan debts present a number of challenges for the home buying process.
Challenge #1: Your Debt-to-Income Ratio
One of the main reasons people are denied a mortgage is because of their debt-to-income ratio. This is defined as the amount of money a person owes in debt versus the amount of money they are making. In general, if your student loan payments take up more than 36% of your income, the mortgage officer will deny you of a mortgage. They won’t believe that you will be able to allocate enough money to pay for the home because of your monthly loan payments.
Challenge #2: Your Credit Score
When you have a lot of debt, it has the chance to negatively impact your credit score. This is especially true if you miss a payment or cannot afford to make the required payment each month. Having a good credit score is essential if you wish to purchase the home of your dreams. Scores that dip below 600 will usually cause a person to get denied of a mortgage.
Challenge #3: Your Down Payment
Obviously, it’s going to be difficult to save enough money for the down payment of a home with a significant amount of your income going towards your debt. In fact, roughly 85% of people with student loan debt said that they weren’t able to purchase a home because they had trouble saving enough money.
Unless tuition decreases or more scholarships become achievable, this student loan predicament will not be going away anytime soon.
Lakeside Title Is Here to Serve You!
Lakeside Title provides title insurance and numerous title-related services, all while making sure your transactions and funds are protected and secure. Our processes streamline residential and commercial real estate transactions for lenders, realtors, buyers, and sellers. To learn more, give us a call at 410-992-1070. We look forward to the chance to serve you!