The Effect of Student Loan Debt on the Approval of Your Mortgage Application

While college graduates have significantly more earning power than those without degrees do, they also tend to have a higher debt load due to student loans. What can these college grads do to improve their standing to secure mortgage financing?

According to the Wall Street Journal , people who graduated with four year degrees in 2014 left college with an average of $33,000 in student loan debt, which is the highest debt load in history. In fact, this debt burden is than that of students who graduated from college in 1994. Additionally, the number of college students graduating with student loan debt has soared to 70 percent.

A recent data analysis by the Wall Street Journal found that relatively small differences in student loan debt make a significant difference in whether a lender approves a mortgage. For example, prospective first time homebuyers who have student loan payments of $300 a month are much more likely to have their mortgage applications approved than those who have payments of $500 or more. The reason for this is the effect of the monthly student loan payments on the applicant’s debt to income ratio. One way to work around this obstacle to homeownership is to look at purchasing a less expensive home.

To learn more ways to offset the effects of student loans on your mortgage application, contact a local mortgage expert.