Student Loan Advice For First-Time Home Buyers

Courtesy of by DAN GREEN Posted 09/14/2016

To read the full article "First-Time Home Buyers Guide: Buying With Student Loans And Debt" CLICK HERE

...Student loans affect your monthly budget which, in turn, affects your DTI. However, there are ways to reduce what you owe to the government each month to help you qualify for "more home".

One method by which to reduce your monthly student loan obligation is to switch to a graduated repayment plan on your loans.

A graduated repayment plan is one for which the payment starts low, then rises every two years to meet the rising income of a typical college graduate. With lower monthly payments, your debt-to-income ratio is reduced, which can help you qualify for your home loan.

Loan consolidation is another way to reduce your monthly student loan obligation.

It's likely that your student loans are of different amounts, and at different rates of interest. By consolidating your loans, your can lump your principal balances together at, hopefully, a lower interest rate.

You can also request a lengthening of your payback period, known as your "term".

By lengthening your term to 15 years or 20 years, you can reduce the amount that you owe each month, which lowers your DTI. This will increase the long-term interest costs of your student loans, but will lower your monthly obligation.

And, a third option doesn't relate to student loans at all -- but, rather, credit card payments and other monthly debts.

If graduated payments and student loan debt consolidation are not part of your plans, consider reducing your high-balance credit cards or any other debt which carries a high minimum monthly payment.

For example, if you have a credit card which requires a minimum monthly payment of $150, and that's more than your other credit cards, you can reduce that card's balance, which will reduce the monthly payment due, which helps to lower your DTI.

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Mortgages For Buyers With Student Debt

As a first-time home buyer with student debt, there are a number of mortgage loan programs well-suited for your needs.

Many allow for low-downpayment and 100% financing, as well.

The FHA loan, for example, which is backed by the Federal Housing Administration (FHA), allows for a downpayment of just 3.5 percent for borrowers with a credit score of 580 or higher.

FHA loans allow debt-to-income ratios of up to 43%, but will allow higher debt-to-income ratios on a case-by-case basis .

You can also use the FHA home loan if your credit scores are below 580, but a larger downpayment of ten percent is required.

The Fannie Mae HomeReady™ mortgage is another loan available to borrowers with student loans. Via HomeReady™, buyers can show a debt-to-income of up to 50%, with certain off-setting factors; and a down payment of just three percent is allowed.

The minimum credit score to get approved for a HomeReady™ home loan is 620.

Buyers with military experience who have student loans should also consider the VA Loan Guaranty program available as part of the G.I. Bill.

VA loans allow for 100% financing and, according to loan guidelines, the maximum debt-to-income of 41% can be over-ridden if some of your income is tax-free income; or, if your residual income exceeds the acceptable loan limit by twenty percent of more.

Courtesy of Lydia Neufeld, CBC News Posted: Oct 17, 2016 12:56 PM MT

First-time buyers, single-income earners take biggest hit with new mortgage rules

May have to lower their expectations to buying a condo instead, mortgage broker says

New rules aimed at making it harder to get a mortgage took effect Monday, and people in the industry say the changes will likely have the greatest impact on first-time buyers and single-income families.

"People kind of stretching to get into the housing market, because money's fairly cheap to borrow, they're now going to be challenged to qualify," Edmonton realtor Patti Proctor said on Monday.

The new rules, announced by the federal government earlier this month, amount to what has been described as a "stress test."

Buyers who want a mortgage for more than 80 per cent of a home's value will be income tested to determine if they could still afford the payments if mortgage rates went up by two per cent.

Buyers who don't pass the test will be turned down, even though they don't actually have to pay the extra money.

Now they would likely qualify for a house priced at $320,000, he said.Before the new rules, a family with an annual income of $80,000 would likely have qualified to buy a $400,000 house, said Krishna Gupta, a broker with Alberta Mortgage Centre.

"They have to lower their expectation from buying a single-family home ... to either a half-duplex or a condo," Gupta said.

Rather than do that, some people are putting off a home purchase until they have saved more for the down payment, he said.

Proctor she said she was busy over the last two weeks with buyers trying to complete purchases before the rule changed.

"It's been 25-per-cent busier for this time of year," she said.

Gupta described the current real estate market in Edmonton as "cool," but Proctor called it "stable."

"Edmonton seems to have dodged the big bullet in the single-family (housing market), condos have definitely been hit harder," Proctor said.

There are specific factors affecting the condominium market, including plenty of new building, she said.

"In general, the single-family and semi-detached homes have sold really well," said Proctor. "We haven't seen a huge drop in prices."

Full Article CLICK http://www.cbc.ca/news/canada/edmonton/real-estate-mortgage-edmonton-homebuyer-1.3808639

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