Financing in Hamilton>Question Details

Pb, Other/Just Looking in Hamilton, OH

I want to buy a house but have a substantial amount of student loan debt ($120k). Credit score is 719. Decent job. Any chance I'll get a?

Asked by Pb, Hamilton, OH Sun Dec 25, 2011

mortgage? I've never paid anything late, and am not financially irresponsible but my education was very expensive. With Income Based Repayment (an option for federal student loans), my loans (which aren't due yet) will be affordable--if I have a low housing payment. At this point, I'd much rather buy a $40,000 house than rent an apartment.

I know the state of Ohio has first-time homebuyer programs but I have no idea if my debt is going to stand in the way. Any advice?

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Hey PB, it's not really about your debt, but about your monthly obigations (what you pay /month) vs. your income. 120K is a lot of debt, that's for sure. But if you have good income (I can only assume you do if you borrowed 120K, med school?) and your other debts are low you could qualify. A good rule of thumb is that your house payment can be about 30% of your total gross monthly income. Your total monthly debt (including a house payment) can be about 40% of your gross monthly income. If you can run the numbers you will see where you stand. Your credit score is high enough that you should qualify for a loan.

Good luck.
0 votes Thank Flag Link Sun Dec 25, 2011
How much do you have for a Dwn Payment?

Ignacio.Realtor@yahoo.com
0 votes Thank Flag Link Wed Dec 28, 2011
Hello PB! It's great to see you doing your research about buying a home. Good job! There is not much 'guess work' involved in the mortgage world anymore. Since it appears you are an educated person, I will provide you with some of the math, and you can crunch the numbers yourself:

1) The minimum credit score requirement for most loan programs is 640. You are well over that!
2) The Loan Program Type will be determined by where you buy and if you have funds for down payment.
2a) If you want to go with a $0.00 down loan program, you can choose to take advantage of the USDA Guarnateed rural housing loan (Section 502). This loan, however, is only available in 'eligible' areas . You would have to do some research to see if your area is eligibile.
2b) If your area is not eligible for the USDA Loan your next lowest down payment program is the FHA 203(b) loan. The FHA Loan requires a 3.5% down payment. Some of this down payment can be provided by the State through the Ohio Housing Finance Agency (OHFA for short). Their website is http://www.OhioHome.org. Feel free to do your own research on this grant program - if you are a new graduate you may be eligible for their 'Grants for Grads' program. You will still need at least 1% of your own funds to purchase.
3) Once you decide upon a Loan Program the next step is to determine how much you qualify for. This is determined by taking your Gross Monthly Income and calculating your Debt Ratio & Housing Ratio. Your Debt Ratio also varies by loan program. For USDA the debt ratio is 41%. For FHA the debt ratio is 43%.
3a) Example: If you make $3,000 per month you would multiply this by 43% for a FHA Loan. 43% of $3,000 is $1,290. This is your debt ratio. From this $1,290 you must deduct all current debt obligations (Car Payments, Installment loans, Revolving credit cards, and student loans if they are not in deferral for at least 12 months). Let's say your total debt is $600. You would take $1,290 and subtract $600 - this would leave you with $690. The $690 is the maximum house payment you could afford (including taxes and insurance and PMI where applicable).
3b) Using the example above, we also must calculate your "Housing Ratio." The Housing Ratio is 31% of your gross monthly income. 31% of $3,000 is $930.
3c) For qualifying, we use the lower of the Housing or Debt Ratios to determine how much you can afford to buy. In this example your Debt Ratio is $690, your Housing Ratio is $930. The lower of these two is $690. This is the maximum house payment you can afford.
4) Now you have enough information to determine what loan program you should use, how much money you will need for a down payment, and how much of a payment you can afford. The next step is to get with a Lender to obtain a pre-approval letter and move forward with making an offer on a home.

I'm aware that this is a LOT of information, but it does give you the 'inside scoop' in how we, as loan officers, cacluate how much you can buy and what loan programs to use.

If you have questions or would like additional information, please don't hesitate to ask. As you can see there is a very large and helpful community here on Trulia.

Best of luck to you in your search for a home, happy new year!
0 votes Thank Flag Link Wed Dec 28, 2011
PB, I am a realtor in Hamilton and have several lenders that I work with here locally. Feel free to email me and I will get those names and numbers to you. I have had several buyers with significant school loans get financed this year, so it is possible. I would love to help you find that perfect home.

Dawne Chapman
dawne.chapman@cbws.com
0 votes Thank Flag Link Mon Dec 26, 2011
You can probably qualify for a loan, but only a lender doing a full loan approval can tell you for sure.
0 votes Thank Flag Link Sun Dec 25, 2011
The only way to know for sure is to apply. Find a good loan officer in your area.
0 votes Thank Flag Link Sun Dec 25, 2011
PB, It sounds like you have done some homework with your research. If your Student Loans will be in deferment for at least a year then FHA would permit you to exclude it from your debt ratio. If repayment will begin in less than a year, your lender can use the Income Based Repayment as a payment. You should talk with a lender.

You also mentioned the Ohio First Time Buyers Program. There is a Rate based program and also a Tax Credit Program. I personally like the Tax Credit Program. Below is a link to a calculator that should allow you to estimate the tax credits available. Again you should talk with a lender familar with these programs.
0 votes Thank Flag Link Sun Dec 25, 2011
It does not matter how much student loan debt you have as long as you can afford the payments as well as a new mtg payment! Id very happy to answer all your questions and help you purchase the dream of home ownership. Happy holidays!
0 votes Thank Flag Link Sun Dec 25, 2011
Ouch. That's a lot of student loan debt. You need to speak with a mortgage loan officer to find out what sort of loans you may qualify for, but it is probably wise to seek out a low cost housing opportunity, as you absolutely need to keep up your payments on that student debt.
0 votes Thank Flag Link Sun Dec 25, 2011
Hello PB,

Contact:

Alicia Taylor
Senior Loan Officer, Mortgage Solutions
msolutions101@aol.com - Work
702-241-0206 - Mobile
702-368-0059 - Work
6655 W. Sahara Avenue Suite A-212
Las Vegas, NV 89146
0 votes Thank Flag Link Sun Dec 25, 2011
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