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According to a report recently published, a lot of millennials in Washington State and nationwide feel that their student loan debt is preventing them from buying a home. But in many cases, this is only a perceived obstacle.
This article explains how student loan debt can affect millennial home buyers in Washington, and which financing programs might be well suited for this group.
Not long ago, the National Association of Realtors® and American Student Assistance® jointly published an insightful study that was based on survey responses provided by student loan borrowers who are still repaying their debt obligations. It zeroed in on millennials in particular.
Terminology note: Most sources define a millennial as a person born between 1984 and 2004, but there are other definitions as well. The NAR report broke it up into two groups: “younger millennials (born 1990 to 1998) and older millennials (born 1980 to 1989).”
According to this report, a lot of would-be home buyers who fall within this age range say that their student loan debt is preventing them from applying for a mortgage loan and buying a house.
“Among non-homeowners, 83 percent cite student loan debt as the factor delaying them from buying a home. This is most frequently the case due to the fact that the borrowers cannot save for a downpayment because of their student debt.”
While it’s true that having too much debt could lower a person’s chances for getting a mortgage loan, the mortgage industry is actually more flexible today than a lot of people realize. So, if you’re a millennial with student loan debt — and you’d like to buy a home in Washington — you owe it to yourself to speak with a loan officer about your financing options.
Regarding DTI Ratios: It’s true that having too much debt (relative to your income) might affect your ability to obtain mortgage financing and buy a home. But the rules for DTI ratios can vary depending on the type of home loan being used and other factors. Some mortgage programs set the limit somewhere around 43% to 50%, as far as the total debt-to-income ratio. But there are exceptions in some cases, particularly for borrowers with “compensating factors” like a good credit history.
Regarding down payments: Surveys have shown that a lot of would-be home buyers believe they have to put down at least 20% when buying a house. Perhaps this is why a lot of millennials in Washington who carry student loan debt feel that they cannot save for a down payment. But there are low-down-payment mortgage options available these days that could benefit many people within this group. Conventional and FHA home loans offer down payments as low as 3% and 3.5%, respectively. And the money can come from a third party, in the form of a gift.
Do you have questions about home loans? Are you ready to apply for a mortgage to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest. Contact us today with any questions you have about mortgages.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.