Student loan debt provides another challenge for first-time homebuyers - Texarkana Gazette

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TEXARKANA -- Local mortgage experts say student loan debt is making it harder for young homebuyers to find good deals in the Texarkana region.
With steadily rising mortgage rates, low housing inventory and highly priced homes already plaguing the market, student loan debt adds to an already long list of hurdles for those trying to purchase their first home.
Jay Davis, vice president for State Bank and a Texarkana, Texas, City Council member, said there are three main ways first-time home buyers are affected by student loan debt: It limits buying power, limits the number of houses in their price range and keeps them from qualifying to purchase a home.
According to the Federal Reserve, nationally, the average person with federal student loan debt carries about $37,000 in debt.
The Texas Real Estate Research Center at Texas A&M University reports that student loan debt can consume anywhere from 3.

Student loan debt provides another challenge for first-time homebuyers - Texarkana Gazette

TEXARKANA -- Local mortgage experts say student loan debt is making it harder for young homebuyers to find good deals in the Texarkana region. With steadily rising mortgage rates, low housing inventory and highly priced homes already plaguing the market, student loan debt adds to an already long list of hurdles for those trying to purchase their first home. Jay Davis, vice president for State Bank and a Texarkana, Texas, City Council member, said there are three main ways first-time home buyers are affected by student loan debt: It limits buying power, limits the number of houses in their price range and keeps them from qualifying to purchase a home. According to the Federal Reserve, nationally, the average person with federal student loan debt carries about $37,000 in debt. The Texas Real Estate Research Center at Texas A&M University reports that student loan debt can consume anywhere from 3.3% to 10.9% of the average Texas college graduate's income, making it harder to qualify for a home mortgage or save for a down payment. Davis said lenders are required to include a 1% debt payment in calculating a buyer's monthly debt-to-income ratio, which can reduce buying power for someone by as much as $46,000. "In the Texarkana area, we've got 98 homes listed under $200,000. If you back off that $46,000 worth of buying power, and take the number of homes listed at $154,000, that reduces the number of homes they could qualify for to 58. That's 40 fewer homes," Davis said. On average, a household earning $50,000 may need just over two years to save the down payment on a $217,000 home, according to the Texas Real Estate Research Center. However, that increases to six years if the household carries the average student loan payment. In a 2021 poll by the National Association of Realtors, 60 percent of non-homeowning millennials (between the ages of 26 and 41) cited student loan debt as a hurdle to purchasing a home. Two-fifths of millennial homeowners reported student loan debt delayed their home purchase by at least three years. Debra Moore, senior vice president of Commercial National Bank, said about 15% to 20% percent of first-time home buyers she sees trying to get a home loan are dealing with student debt. She said many new buyers are unaware that the extra debt has to be included in the debt ratio, even if it's in deferment. "Unfortunately, a lot of home buyers don't know what their required payment is once it gets out of deferment. So, we have to count 1% of the balance in the debt ratio," Moore said. "Typically the required payment is less. So, if the home buyer would get what the required payment is, it would usually be less. So, we ask them to try to find out what that would be, even if it's in deferment." Davis said most loan programs require a debt-to-income to be below 45%. "That's going to come into play, whether someone qualifies or not, with that student loan debt." Davis said the cost of attendance at a local four-year institution option like TAMUT is pretty low, decreasing some of the student debt load for those who stay home and go to school. The cost of attendance at TAMUT is at about $18,000 a year, Davis said. "You're looking at being able to graduate from A&M-Texarkana for less than $75,000. And that's if you didn't qualify for any scholarships or anything like that. I think TAMUT has done a great job at keeping costs as low as they can for local students. Texarkana College has done a phenomenal job, as well," he said. With the pause on federal student loans coming to an end Aug. 31, Davis said his best advice to a first-time homebuyer with student loan debt would be to reach out to a mortgage expert and allow them to explain the process. "There's so much misinformation out on the internet, and there's so much misinformation, even word of mouth, that a lot of first-time home buyers or college graduates don't even look to see if they do qualify. And each person is going to need to balance whether it's the right time for them to either rent or purchase a home," he said. He gave some pieces of advice for people who are about to have to start paying student loans: • Contact your student loan servicer to make sure they have your up-to-date contact information • Make sure your debit/credit card is not expired on your account • Consider repayment or consolidation options Moore also recommended consolidation options. "That tends to be what a lot of the ones that have student debt have been successful to do to get that payment down," she said.
The Original Article can be found on Texarkana Gazette

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