Wisconsin Mortgage Corporation Recommends Student Loans and Mortgages — What Do They Mean?

Facebooktwitterredditpinterestlinkedinmailby feather

With the cost of college increasing, many students have to take out multiple loans to help them reach their goal. Student loan payments don’t begin until six months after graduation. But what happens if you want to buy a home at this time?

Student debt is consuming a good portion of their earnings, making it difficult to save for a down payment. According to the National Association of REALTORS®, of the 20% of first-time home buyers who found it difficult to save money for a down payment, 54% blamed it on their student loan debt. The massive student loan debt is causing college graduates to remain renters because they can’t save enough for a down payment.

Student loan debt is huge: roughly between $902 and $1 trillion in total outstanding student loan debt in the United States. According to the Federal Reserve Board of New York, these are approximately 37 million student loan borrowers with outstanding student loans. However, these first-time home buyers are vital to the housing industry. They accounted for nearly 1/3 of homes purchased in the past year.

Good news — the Fannie Mae and Freddie Mac 3% Down Payment Program is tailored to help first-time home buyers get into their own home. With the higher loan-to-value ratio, Fannie Mae requires at least one of the people named on the mortgage application to be a first-time home buyer. They define a “first-time” purchaser as someone who has not owned a home within the last three years. Freddie Mac’s 97% financing product is open to repeat buyers, as long as the borrower does not have “any individual or joint ownership interest in any other residential properties” at the time of purchase. For both programs, the loan must have a fixed rate of interest. Adjustable-rate mortgages (ARMs) are not permitted by the new 97% financing programs. The term can be up to 30 years in length, but no longer. Lenders offering the Fannie and Freddie products must perform full income documentation to reduce risk. This means requesting any and all documents necessary to verify the borrower’s income situation — tax returns, pay stubs, bank statements, etc.

As more details become available, we expect larger banks like Wells Fargo, Chase and US Bank to give guidance on when and if they will adopt these new programs. A 97% Conventional Loan is not new to the mortgage market. These programs are really a redesign rendition with some different bells and whistles. Other programs like FHA, Federal VA and USDA Rural Housing will continue to play an important part in efforts to achieve home ownership. More options are a good thing, and we expect to see more creativity in 2015.

Buyers should always get pre-approved with a qualified lender, who will look at all options available. Loan Officers at Wisconsin Mortgage Corporation will do a complete analysis with home buyers before they begin to house hunt.

Tags: , , , , , , , , , , ,

Categories: Mortgage

Leave a Reply

Your email address will not be published. Required fields are marked *

Home Valuation Report