Working with young homebuyers who also have student debt?
The millennial generation tends to be cautious about major financial decisions, but they’re now buying homes in bigger numbers.1 With the right guidance, young homebuyers can manage student debt2 and invest in their future. Here are some tips to help you help them.
1. Prioritize a good credit score.
A good credit score is key for getting preapproved and a competitive rate. Encourage your clients to strive for the 750 range on the FICO scale, which is considered “excellent” by creditors and lenders.3 Clients can boost their score by making sure their credit report is accurate, using automatic payments to make sure bills are paid on-time, and working to lower their debt-to-credit ratio.
2. Look into student loan consolidation.
Debt-to-credit (or debt-to-income) ratio is a major factor in loan approval. Almost 20% of people with student loans who apply for a mortgage are denied for this reason.4 By consolidating student loan debts, potential borrowers may get a lower interest rate so they can pay off their debt faster.
And remember to take a deep, long sniff—a musty smell might mean mold has infiltrated the home.
3. Explore down payment assistance.
Saving for a down payment is challenging, especially with the added pressure of student loan debt. Young homebuyers may qualify for down payment assistance programs from the government. Like FHA loans, or VA loans for those who have served in the military. The Department of Housing and Urban Development is a good place to start.
4. Learn about recent rule changes.
In 2017, Fannie Mae announced rule changes to make it easier for those with student debt to own homes. This change may improve your clients’ borrowing chances. Also, non-mortgage debts being steadily paid by others (like the borrower’s parents) will not be included in this calculation.5
5. Consider up-and-coming locations.
Looking at homes in more affordable, less-in-demand locations can increase your clients’ chances for loan approval with a more manageable budget.
Learn how the Truist Correspondent Lending team can work with you to connect with your clients.