Student Loans: Statistics, Struggles and Solutions
There are many ways to describe the bold, multifaceted millennials. They’re tech-savvy, they’re family-centric and they have a desire for a better work-life balance. They’re also confident, ambitious and achievement-oriented. And, for the past few years, they’ve preferred renting over buying a home. But you can’t fit millennials into a box of predictable actions. The tide is changing: More and more millennials are buying their first homes, and we’re here to help.
What Is A Millennial?It’s the name for people who were born between the mid-1980s and the mid-1990s. They’re the cohort following Generation X.
Why Has Homeownership Been A Struggle For Millennials?
For millennials, obtaining a mortgage has become burdensome, not necessarily because they don’t want to buy a home, but because a considerable number of them have student loans. According to research from Freddie Mac, more than half of the workers employed in the “essential workforce,” including fields such as health care, education and law enforcement, have made their housing decisions based on their student loan repayment obligations.
Homeownership Is On The RiseRecent statistics indicate that younger buyers are turning in their rentals and instead grabbing the keys to homeownership. According to data from the Census Bureau, homeownership among buyers age 35 and under rose from 36% to 36.5% in just the last year. For older millennials (in the age range of 35 – 44), homeownership rose from 58.9% to 61.1% in the same time frame.
Good News For Our PartnersData from the National Association of REALTORS® shows that millennials represent the largest segment of home buyers. Because younger buyers are taking the leap into homeownership, it’s great news for our broker partners, who can attract more prospective clients. QLMS is here to help you reach millennials with a variety of loan options and programs, helping them overcome their number one challenge: handling their student loan debt. QLMS is also in the right position to appeal to tech-savvy millennials because of our innovative technology. You’ll be speaking their language.
Delivering Solutions Targeted Toward MillennialsAs a QLMS partner, you can provide smart options for millennials who are still paying off their student loan debt.
Conventional And Jumbo Loans
If your client is choosing a conventional or jumbo loan, their student loans are included in their debt-to-income ratio (DTI), but it’s now getting easier to qualify. If no payment is listed on their credit report or the payment is $0, we use 1% of the existing balance. In certain instances, we may use the payment listed on the statement. If your client has 10 payments or fewer left on their student loan, the payments can be completely excluded from their DTI.
Do you have clients whose parents pay their car loans or student loans? That debt doesn’t have to be counted in their DTI – the parents don’t even have to be an obligated cosigner on the loan. Your Account Executive can walk you through the requirements.
Paying Off Student Loans With EquityWith a conventional loan, you can help your millennial clients pay off their student loans using the equity in their home. They’ll pay the reduced fees associated with a rate-term refinance as opposed to a cash-out refinance. The key benefit is reduced closing costs.
Here are the qualifying restrictions for this loan pricing:
- Client must maintain at least 20% equity in their home after the cash is taken out. If they have an adjustable rate, the minimum is 25%.
- Client must pay off one or more student loans at closing. No additional debts can be included.
- If there’s any incidental cash back to the client after paying off the loans, it must be no more than 2% of the loan amount or $2,000, whichever is less.