Many people have taken out loans to finish their college education. While it benefitted you as a student financially in order to pay tuition, it can potentially hurt when trying to buy your dream house.
According to the Anderson Independent Mail, student debt is factored in much differently when considering debt-to-income ratio. The rules have changed drastically.
“Instead of using the minimum payment figure on student loans when calculating the applicant’s debt-to-loan ratio, lenders must now use 1 percent of the loan as the basis for the debt ratio,” reports Abe Hardesty.
In other words, your monthly payment is not as important as the total balance you owe. As a result, your debt-to-income ratio will look a lot different.
For example, if you have a student loan worth $50,000, it won’t matter that you are paying $100 per month – even if you’ve never missed a payment. Lenders will now consider one percent – in this case $500 – for the debt ratio.
As a result, it is advisable to consider how much loan debt you want to be in. Your ability to buy a house later may depend on it.
The Powell Group invites you to come in and talk with us about all your debt-to-income ratio questions and concerns. Our team members are always here to help you. We also have several people that we work with to help answer your mortgage and lending questions.
When you are ready to buy your affordable dream house, you may look on our website to view all of our available homes. We look forward to working with you.
(Picture used from Wikimedia)