We have all come to the realization by now that student loan debt is causing problems for a lot of millennials looking to purchase a home. The ratio of debt-to-income, known as the DTI, is causing many would-be homebuyers pause as they struggle to qualify for a mortgage with high amounts of student debt. There are ways to solve the problem – some better than others. Let’s take a look:
- Extend your loan term by enrolling in another government program. (Extending your loan term will probably increase the total interest you will pay over the life of the loan.)
- Refinancing has better results. Many students have obtained a lower interest rate and reduced their loan payments by an average of about $218 per month. Refinancing with a private lender can reduce your loan payments -but it may also disqualify you from qualifying for benefits, such as loan forgiveness or income-driven repayment programs.
You should also considering purchasing a smaller home than your parents and grandparents have. This will allow you to be able to afford it and work towards a goal of owning that dream home. You may also receive special help if you are a first-time homebuyer and there are even programs for students who have a large amount of student loan debt.
Our personal favorite way for students who may be struggling to obtain a mortgage with their massive amounts of student loan debt is to use a Mortgage service that participates in a Down Payment Assistance or Grant program.
Here are some state-specific DPA programs to assist you in your dream of becoming a homeowner:
- Washington D.C./Maryland: Discounted mortgage rate and up to $5,000 in Down Payment Assistance when you purchase a home in a “sustainable” community” and have at least $25,000 in student loan debt.
- Ohio offers a “Grants for Grads” program that provides DPA and reduced-rate mortgages for first-time homebuyers who have obtained one of the following degrees within the last 4 years:
- Other Post-Graduate Degree
- Rhode Island’s Ocean State Grad Grant program gives up to $7,000 in forgivable DPA assistance to qualified first-time buyers who have graduated within the last 3 years.
There are many other states who offer similar assistance, but here at USF we have our own DPA program. Check out what you need to do to qualify to receive downpayment assistance or a grant from USF.
Our program offers the following benefits:
- Up to 3.5% down
- No Repayment of Gift/Grant Funds
- 620 Minimum FICO Score
- No Second Mortgage