Student Loan Debt Doesn’t Have to Eliminate Recent Grads From Buying Homes

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September 27, 2018 | By RGR Marketing Blog

6 Things Recent Grads Need to Do to Qualify for a Mortgage

Student loan debt is, for many, an albatross that hangs over their necks for many years after college is over and done with. It’s an unnecessary evil that many people must take on if they hope to achieve their dreams. But for many grads, carrying such heavy debt can sometimes alter another one of their dreams – the dream of one day owning a home.

While student debt can make getting approved for a mortgage a little more challenging, it doesn’t make it impossible – in fact, far from it. If you have clients who are looking to buy homes but are saddled with student debt, all is not lost. If you’re a mortgage professional looking to capture new business, here are six things you should tell them to do that will improve their chances.

Check Their Credit Report

Credit reports aren’t always accurate. It’s not uncommon for there to be mistakes, and having just one or two mistakes can have a negative impact on one’s credit score. So, the first thing you should tell your client is to check their credit report with all three credit bureaus. They should review it thoroughly and submit disputes for inaccurate information to have them removed.

Practice Good Credit Habits to Improve Score

Practicing good credit habits is essential whether someone is trying for a home or not. Things like paying their bills on time, keeping their credit utilization under 30%, and having different types of credit are the foundations of building great credit.

Create a Debt Repayment Strategy

If your client has multiple sources of debt, then they should create a workable strategy to help reduce it. They should review their debt sources to find the credit card with the highest interest rate. Any extra money they have should be applied to that card’s balance. Once this card’s debt is paid off, continue the process with the next-highest interest card. This strategy will help reduce the amount your client is paying in interest, so their debt-to-income ratio can improve.

Lower Debt-to-Income Ratio (DTI)

One of the most important factors lenders look at in a borrower is their debt-to-income ratio. The lower it is, the more likely an approval will be granted. Most lenders look for DTI ratios of no more than 28% and 36%. This means no more than 28% of the borrower’s gross income should go toward housing costs and no more than 36% toward their total debt obligations (including mortgage). If your client’s DTI ratio is below these thresholds, then they will be in good shape.

Get Pre-Approved for a Mortgage

If you have a client with student debt, then they should get pre-approved for a mortgage before they start shopping for a home. This will give them an amount of money to work with, so they can stay within their budget and it will prove to sellers that they are serious about buying. As long all the borrower’s information stays the same between the pre-approval and the closing, the process of buying a home should go much quicker and smoother.

Find a Down Payment Assistance Program

One of the biggest hurdles for a new grad is saving up enough money for a down payment. Thankfully, there is help available, even if they have a lot of student debt. For instance, there are federal programs like FHA loans that only require 3.5% down. If the home is in a rural area, then a USDA loan, which requires no down payment, might be obtainable. Likewise, if the grad spent any time in the military, they may be able to qualify for a no-down payment VA loan. There are even companies out there that provide down payment assistance via an investor format, like Homevest.

If debt prevented people from buying homes, there would literally be zero homeowners in the United States. The key is how your client manages their debt. If they can start with the above six tips, homeownership might be closer to them than they might think. And if you’re in the market to improve your sales pipeline, then it may be time to purchase high quality mortgage leads– get in touch with RGR Marketing today, and we’ll help boost your bottom line.

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6 Things Recent Grads Need to Do to Qualify for a Mortgage

Check Their Credit Report

Practice Good Credit Habits to Improve Score

Create a Debt Repayment Strategy

Lower Debt-to-Income Ratio (DTI)

Get Pre-Approved for a Mortgage

Find a Down Payment Assistance Program

Start making more
money today!

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6 Things Recent Grads Need to Do to Qualify for a Mortgage

Check Their Credit Report

Practice Good Credit Habits to Improve Score

Create a Debt Repayment Strategy

Lower Debt-to-Income Ratio (DTI)

Get Pre-Approved for a Mortgage

Find a Down Payment Assistance Program

Start making more money today!

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