May 20, 2024
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When Education Precedes Housing

Millennials were born in mid-1980s through the 2000s. They follow the generation known as X. For the millennials who want to buy a home, obtaining a mortgage has become a challenge. Why? Many millennials have taken on substantial student debt in order to further educate themselves and expand their job opportunities, which can affect qualifying for a mortgage

According to the National Center for Education Statistics, “For the 2013-14 academic year, annual current dollar prices for undergraduate tuition, fees, room and board were estimated to be $15,640 at public institutions, $40,614 at private nonprofit institutions, and $23,135 at private for-profit institutions. Between 2003-04 and 2013-14, prices for undergraduate tuition, fees, room and board at public institutions rose 34 percent, and prices at private nonprofit institutions rose 25 percent, after adjustment for inflation.”

With the increased cost of fees and tuition, student loan borrowing has also increased, so graduates have higher levels of debt and are employed at lesser rates. This additional burden has limited the millennials’ ability to buy homes as well as their social mobility. According to the Census Bureau, between the first quarter of 2005 to the first quarter of 2015, homeownership has dropped for Americans under age 35, from 43.3 percent to 34.6 percent. Many attribute the drop to student-loan debt strangling a buyer’s ability to get a mortgage.

Many graduates can pay their loan once they get a job, true, but the greatest factor affecting millennials with student debt is loan delinquency along with a high debt-to-income ratio. Repayment delinquency affects almost 30 percent of student-loan borrowers. A derogatory credit history makes obtaining a mortgage approval more difficult. In addition, student-loan payments prevent affordability. Saving for a down payment also becomes difficult, which is why many of the millennials move back with family.

Enough with the downer stats. Sooooo, what are the solutions if you want to buy a house?

First, let me say that qualifying is different from affording. You may be able to qualify, but not afford, to buy a home. Assuming that you work your budget and feel you have a target purchase price and mortgage, the next question is how do you qualify. I can’t give you a simple answer, but I could address the student-loan issue (which is the main theme of this article).

Remember, the world loves an educated homeowner!

By Carl Guzman

 

Carl Guzman, NMLS# 65291, CPA, is the founder and president of Greenback Capital Mortgage Corp., a Zillow five-star lender. http://www.zillow.com/profile/Greenback-Capital/Reviews/?my=y. He is a residential and reverse-mortgage financing expert and a deal-maker with over 26 years’ industry experience. Carl and his team will help you get the best mortgage financing for your situation, and his advice will save you thousands! www.greenbackcapital.com [email protected].

 

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