Student Loan debt vs. homeownership. Well it seems that jury is out on this questions. I have run into several instances within the past few month where student loans have caused buyers to really scramble. In the many cases the buyers were able to consolidate their loans and move on to purchase their dream homes. Unfortunately in one case it didn’t work out. Because of this I found this article from DSNews interesting and thought I share the information.
The Impact of Student Loans on Millennial Homebuyers
According to many reports, student loan debt is a significant hurdle for millennials when buying a home. New numbers from the First American Economic Center contradicts those findings. They show student loan debt is more likely to delay the timing of homeownership, but it’s not necessarily a deal breaker. To examine the impact of student loan debt on house-buying power. The report looked into the median household income of a prospective first-time home buyer, who is, by definition, a renter. “Renter’s house-buying power is based on the prevailing 30-year, fixed mortgage rate (4.64 percent in January), and assumes a 5 percent down payment and that one-third of pre-tax income is used for the mortgage,” the report reads.
The average student loan debt for those that complete their bachelor’s degree is approximately $30,000. Based on a 6 percent Federal direct student loan interest rate, the average monthly payment is just above $300 per month, or nearly $4,000 per year. The report pointed out that this reduces median household income for those that complete their bachelor’s degree and, therefore, reduces house-buying power by $23,000 to $323,603. While the reduction in house-buying power is not ideal, renter house-buying power for those with a bachelor’s degree is still more than $120,000 greater than renters with just a high school education.
To Read The Entire Article from DSNews Click Here
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