Student loans can affect every part of a borrower’s life. They can take center stage when important decisions need to be made, and buying a house is one of the big ones. Student loan borrowers have been delaying the decision to buy a house and citing their student debt as the reason. Ameritech Financial, a document preparation company that assists student loan borrowers in applying for federal repayment plans, reminds borrowers that income-driven repayment plans may enable them to buy a house by potentially reducing their monthly payment.
According to a report by the National Association of Realtors and American Student Assistance, the median number of years that student loan borrowers are delaying their decision to buy their first house is seven years, though depending on location, borrowers could delay a lot longer. About 83 percent of non-homeowners shared that their student loans were the deciding factor to delay their home purchase. However, people with a college degree, regardless of debt amounts, are still more likely to buy homes than those who have only a high school diploma.
“Owning a home is one of those things young adults may daydream about,” said Tom Knickerbocker. “But getting an education is a common dream, too. It’s unfortunate that because so many people choose to go after that dream, student loans end up holding so many back. No one should have to choose between the two dreams.”
Why are borrowers delaying homeownership? High student loan debts can curb the home buying process in many ways. First, high monthly loan payments can prevent borrowers from saving up for a down payment and closing costs. Second, those high payments can inflate borrowers’ debt-to-income ratio, causing mortgage lenders to decline applications. Third, borrowers often feel insecure about their student debt, and that insecurity can lead to discouragement that may prevent them from even attempting to apply for a mortgage.
The main limiting factor for student loan borrowers in the home-buying process is the size of their monthly payment. The debt-to-income ratio takes into account all monthly debt payments, so the lower those are, the lower the DTI will be, and the more likely it will be for borrowers to get approved for a mortgage. Additionally, having a low monthly payment makes it much easier to save for a down payment. Income-driven repayment plans offered through the Department of Education may lower eligible borrowers’ payments enough to allow them to pursue their home-buying dreams.
However, borrowers who go this route should be aware that the mortgage rules regarding student loans are changing. Despite industry leaders Fannie Mae and Freddie Mac making it easier for student loan borrowers to get approved for a mortgage, borrowers may still run into lenders who may have stricter rules regarding student loans and DTI. Ameritech Financial encourages those borrowers to stay positive. Common advice is to shop around for a mortgage, so borrowers who are encountering lenders unable to work with their student loan situation should keep trying.
“Student loan borrowers who want to buy a house should know that it is possible,” said Knickerbocker. “IDRs enable borrowers to move forward in their lives. And for many, that means buying a house. Once the barriers are gone, we hope that individuals with student loans can buy homes with confidence. Ameritech Financial hopes to help our clients remove those barriers so they can achieve these milestones like buying a home.”
About Ameritech Financial
Ameritech Financial is a private company located in Rohnert Park, California. Ameritech Financial has already helped thousands of people with financial analysis and student loan document preparation to apply for federal student loan repayment programs offered through the Department of Education.
Ameritech Financial is a member of the Association for Student Loan Relief (AFSLR), and each representative on the phone has received the Certified Student Loan Professional certification through the International Association of Professional Debt Arbitrators (IAPDA).
Ameritech Financial prides itself on its exceptional Customer Service.
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