Heads-up for millennials and first-time home shoppers carrying student debt: New rules could make it tougher to qualify for a low down payment mortgage from the Federal Housing Administration. New rules on down payment gifts could complicate things for you as well.
The net effect of the changes, say mortgage lenders and analysts, will be to make FHA loans, which traditionally have been the go-to financing source for young, first-time and moderate-income purchasers, less attractive.
Here’s a quick overview of who will take the brunt of the new restrictions:
At the end of last year, 43 million people, most of them younger than 40, had an estimated $1.2 trillion in outstanding student-loan debt, with an average balance close to $27,000, according to research by the Federal Reserve Bank of New York. Problem rates on those loans are significant: 17 percent of borrowers are delinquent or in default, and another 20 percent are current on payments but have experienced delinquencies in the past.
[More Harney: Lenders say they’re easing mortgage terms. Statistics suggest otherwise.]
Student loan payment obligations get rolled into the crucial debt-to-income (DTI) ratios that lenders use to judge whether a borrower has the ability to repay a mortgage. Too high a ratio of total household monthly debt payments to income — typically, lenders want that number to be no higher than 43 percent to 45 percent — means the applicant is carrying too much debt and is more likely to default on the mortgage. Such applicants typically have a tougher time getting approved than people with lower DTIs.
read more at: http://www.washingtonpost.com/realestate/new-rules-make-it-tougher-for-people-with-college-loans-to-buy-houses/2015/09/15/a31a940a-5b0c-11e5-b38e-06883aacba64_story.html
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