First-time Home Buyers Find Barriers in Student Loan Debt

Are first-time buyers becoming scarce? According to recent statistics from the National Association of Realtors, there are fewer first-time home buyers in the market today. In a normal market, first-time home buyers represent 40% of all home purchases. But in the last 4 years, that percentage has dwindled down to less than 35%.  

In the last 3 months, the percentage of first-time buyers in the market fell to 30%.

There have been many theories behind this disturbing trend. The Great Recession meant job losses and income cuts for many Americans. Unemployment was high. Mortgage requirements became tougher. And student loan debt became higher.

In recent years, student loan debt grew at an unprecedented rate. According to recent studies, college graduates currently average about $27,000 in student loan debt. 10% of graduates average more than $50,000 in student loan debt. Around 3% of them have $100,000 in debt.

How does this hurt home buying? Mortgage loan qualifying requires an examination of the home buyer’s debt-to-income ratio. In most cases, the total amount of debt payments, including the mortgage payment, cannot exceed 43% of the buyer’s monthly income. Some mortgages require debt-to-income ratios to be as low as 36%.

For some first-time home buyers, the student loan payment amounts can easily cause them to exceed the allowed debt-to-income ratios, even if their other debts are modest.

If you have student loan debt, it doesn’t mean you cannot buy a Fountain Hills home. However, you will need to make sure your total debt picture is as small as possible. From car payments to credit card bills, keep your debt obligations at the absolute minimum. And if you need help managing your student loan debt, visit the U.S. Department of Education website for information about payment deferral and forbearance.

If you are a first-time home buyer, give yourself the advantage of having an Accredited Buyer Representative! I will refer you to reputable mortgage lenders who can coach you on mortgage qualifying and find the best financing for you.

For the best home buying experience, let me be your guide to the Fountain Hills real estate market! I have helped Arizona home buyers for over 30 years, and I'd like to help you too! I will provide you with expert, professional representation throughout the home buying process.

Contact me today for complete home buying help in Fountain Hills!

Tina Nabers
Nabers Property Management & Real Estate
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