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January 2017   Volume 43, Number 1      
 

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What Today’s Student Debt Means for Tomorrow’s Housing Market

Americans collectively owe $1.2 trillion in student loan debt. This debt continues to burden college graduates for years, especially when they are trying to buy a home. The more money buyers owe on student loans means the less they have available for a down payment and monthly mortgage remittances.

With too much debt, prospective homebuyers with student loan debt will have borrowed themselves out of their ability to purchase a home, given that even the most generous lenders will refuse applications with debt to income ratios of greater than 43 percent.

“Debt service can damage the eligibility of college graduates even when they consistently make their monthly payments,” says Mikkie Mills, writer at Adam’s Homes, a homebuilder serving the Southeastern United States. “Sometimes, though, the demands of re-payment and the lack of adequate employment opportunities create the perfect storm for default.”

Defaulting can lower the potential homebuyer’s credit score significantly, hurting job prospects and mortgage applications. In addition, property insurance premiums are rising after having been low for a long period of time, making it even more expensive for potential homeowners to obtain insurance on their homes.

Property insurance premiums also affect mortgage underwriting, given that property insurance premiums impact the PITI, which stands for principal, interest, taxes and insurance, of a mortgage


 

 

 

 

In this issue:

5 Real Estate Trends to Watch for 2017

Five Signs Your Local Real Estate Market May Be in a Bubble

Commercial Real Estate Is Facing Some Significant Challenges

What Caused a Recent Spike in Foreclosures?

Homeownership Recovers From 50-Year Low

Mortgage Rates See Increase After Presidential Election

New Residential Construction Starts Jump 25 Percent

Trump’s Tax Plans Could Affect Real Estate Market

Useful Information From the 2016 Homebuyer Survey

What Today’s Student Debt Means for Tomorrow’s Housing Market

 


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