How to talk to your clients about student debt

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09/26/2016 | Author: Editorial Staff

The student debt load in the U.S. now stands at $1.3 trillion, representing 10% of all outstanding debt. Nearly three out of four students graduating from four-year colleges had student loan debt in 2012.

According to NAR’s Student Loan Debt and Housing Report, 71% of student loan borrowers current in their repayment say student debt has delayed them from buying a home. But what proportion of those who cited student loans as an obstacle to their homeownership dreams could have benefited from more information about the mortgage process and someone to answer financial questions?

If potential clients bring up student loan debt, there are a few things to keep in mind:

  • Ask about their repayment plan. Lenders will want to see they are paying on the loans and, if possible, an income-based repayment plan.
  • Discuss their debt-to-income ratio. It’s not just student debt that will affect their ability to borrow for a home. Their overall monthly debt-to-income ratio must be below 43% to qualify for most mortgages.
  • Factor in how much they can save for a downpayment. Committing to a larger downpayment will make them more attractive to lenders, but if they can’t afford that, it’s worth investigating whether their individual situation would be a good fit for an FHA loan.

Categories: Buyers
Tags: buyers, loans, financial tips


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The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

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