CTips3_CollegeStudent

College students who are interested in buying a home can still do so by qualifying for certain mortgage programs. These programs consider factors such as debt to income ratio, credit score, and available down payment. While a high debt to income ratio may disqualify from conventional loans, government-backed loans like FHA and VA are options. FHA loans have lower requirements and consider education as employment history. VA loans are available to those in the Armed Forces or National Guard. Pre-approval is the first step in the mortgage process, and lenders look at factors like debt-to-income ratio and credit score. It is important to make on-time payments and improve credit score if it is low. Midtown Mortgage offers tools for credit repair. Hello everyone, it's Chad Winsnett with Midtown Mortgage and today we're going to talk about home loans for college students. So are you a college student who is interested in purchasing a home? You may be dealing with looming student loan debt while working part-time or maybe not at all, wondering if it's even a possibility to own a home in your current situation. Luckily, it's still possible to own a home even as a current college student. All you have to do is qualify for certain mortgage programs available at the state and national level. If you want to buy a house as a current college student or as a former student who's dealing with student loans, consider that the programs available to you are based on your debt to income ratio, your credit score, and the money that you have available for a down payment. You may not qualify for a conventional loan if you have a debt to income ratio higher than 50%. A conventional loan is a mortgage that follows guidelines set by Fannie Mae and Freddie Mac. Those are government-sponsored agencies which standardize mortgage lending in the United States. However, you may still be able to buy a home with a government-backed loan. These loans are insured by the federal government, making them less risky against a loss from a default. This allows mortgage lenders to issue loans to borrowers with lower DTI ratios. FHA loans is one possible loan program for you. An FHA loans are backed by the Federal Housing Administration and have lower requirements for loan approval. Some of those requirements include DTI ratio. DTI ratio with FHA loan requires a maximum DTI ratio of 56% in many cases. With a credit score, you only need to have at least a 580 FICO score to qualify for an FHA loan. Additionally, with an FHA loan, you may be able to have two years or higher education considered as employment history to help you qualify. And VA loan is a possibility as well. If you serve in the Armed Forces or the National Guard, you may qualify for a VA loan from the Department of Veterans Affairs. Those requirements include very similar to FHA, but with VA, the maximum DTI is oftentimes can be up to 60%. And once again, with the credit score, you just need to have at least a 580 to qualify for a VA loan. But before you apply for a VA loan, make sure that you meet certain service requirements. The VA may also has a variety of policies in place to assist borrowers who have student debt but want to buy a home. Those opportunities include student loan cash out refinance, debt paid by others, student debt payment calculation. In some cases, we're allowed to accept student loan payment information on credit reports, which can make it easier sometimes to qualify. To understand the student loan debt on the ability to get a mortgage, you have to recognize the nuances of the loan process. The first step to getting a mortgage is a pre-approval. Pre-approval documents serve two primary purposes, establishing the loan amount that you qualify for and determining whether you're a good candidate for a mortgage. Your pre-approval letter will estimate your monthly payment, which helps you to shop for homes within your budget. Lenders determine your pre-approval amount by collecting information such as your credit history and current student loan balance. Underwriters will look at your current debt, credit score, income, any kind of unusual activity in your recent bank account transactions, and any other assets you may have. Lenders will always look at your debt-to-income ratio when they consider you for a loan. Your debt-to-income ratio, also known as your DTI, is the percentage of your monthly income that goes towards debt, like student loans. You may have trouble getting a mortgage if you have a high DTI ratio. To calculate your current DTI, first add all your regular, recurring, and required payments. Some payments that you should include in your DTI calculation include student loan payments, your monthly mortgage payment or rent, your homeowner's insurance or renter's insurance premium, any monthly homeowner's association fees that you pay on your current property, minimum credit card payments, auto loan payments, personal loan payments, court-ordered back taxes, alimony, or child support payments. But leave out expenses that vary from month to month. Some expenses that you shouldn't include in your DTI ratio calculation would be utility bills, transportation costs, savings account contributions, 401k contributions, health insurance expenses. Remember to only include the minimum required payment you need to make each month. So if you have $20,000 in student loan debt, but you only have a minimum required payment of $100 a month, only include the $100 in your DTI ratio calculation. Add all your monthly recurring expenses, then divide the number you get by your total pre-tax monthly income. If someone else is applying for the loan with you, include their income and debts in your calculations as well. Multiply the number you get by 100 to get your DTI ratio as a percentage. Remember, most lenders like to see DTI ratios of 50% or lower. We're also going to consider credit score when looking at approval for your mortgage. While the required score varies based on loan type, the recommended credit score for a conventional loan is 620. Requirements for certain government-backed loans, like FHA loans, VA, USDA, are slightly lower with a recommended score of 580. Student loans don't hurt your credit score by themselves and actually have the potential to boost your credit mix and history if handled right. The biggest issue with student loans and credit scores when applying for a mortgage is on-time payments made in full. Late payments over 30 days and loans and collections can appear on your credit report, which lenders consider for pre-approval. If you're thinking about purchasing a home but your credit score is low, consider taking actions to improve your score before applying for a mortgage. Here at Midtown Mortgage, we have tools such as Wayfinder. That's a great piece of software that we have that will help you with the credit repair process. If you want to hear more about that, reach out to us at 979-690-5011 or visit our website at www.midtownmortgage.com. Thanks for listening today and I look forward to talking with you again soon.