New Mortgage Requirements
Last month new Federal rules took effect which impose new requirements and restrictions on home buyers. The purpose of these new regulations are intended to protect borrowers against predatory lenders. Its good to be protected but the threshold to qualify for a loan is now much higher.
Mortgage lenders also have new legal protections. Theirs are enforced provided they no longer approve loans for prospective buyers with total monthly obligations exceeding 43% of their monthly gross income.
According to the Institute for College Access and Success, 7 of 10 graduates from the class of 2012 have student debt. Among this group, the average debt is about $29,400.
Depending upon your interest rate, a debt load of $29,400 scheduled for a 10 year repayment will be in excess of $300 per month! That payment is going to impair your ability to qualify for a mortgage.
Student Debt May Slow Home Sales Growth
According to the National Association of Realtors, existing home sales in America during 2013 were the highest since 2006. Median prices maintained strong growth with a 11.5% increase, year over year. The downside of this same report cites a decrease in applications for new loans, though.
Cited in a recent feature in the Washington Post, is David H. Stevens, chief executive of the Mortgage Bankers Association. “This is a huge issue for us,” said Stevens. “Student debt trumps all other consumer debt. It’s going to have an extraordinary dampening effect on young peoples’ ability to borrow for a home, and that’s going to impact the housing market and the economy at large.”
Speaking before the Federal Reserve Bank of St. Louis, the Consumer Financial Protection Bureau’s Rohit Chopra said that rising student debt “may prove to be one of the more painful aftershocks of the Great Recession,” with ramification for the housing market.
“With more and more Americans putting big chunks of their income toward student loan payments, that means they’re less able to stash away extra cash for their first down payment,” Chopra, the agency’s student loan ombudsman, said in an interview.
The good news is that Student Loan Relief Service can help anyone minimize the impact of student debt.