Consolidating debt affects credit

10-Mar-2020 07:36 by 3 Comments

Consolidating debt affects credit

Fortunately, my mortgage bank is approved to offer more homebuyer assistance programs than any other bank that I’m aware of and can help you determine which program you may be eligible for.

Contact me here or call (951) 215-6119 to discuss your situation and get the facts.Or think of it this way, every 0/month in student loan payments will reduce a buyers purchasing power (loan amount) by about ,000!Fortunately, buyers with student loans can qualify for more when using FHA financing because FHA allows DTI ratios to go up to 56% DTI ratio.The FICO scoring formula will penalize your credit score because you owe more than you initially borrowed….is similar as if you are exceeding your credit limit on a revolving credit card….it’s a signal that a borrower is in financial distress.If needing higher credit scores, you may want to consider paying down the student loan balance so that it doesn’t exceed the original loan limit.Student loans in repayment phase builds positive credit history, but deferred student loan debt can have the opposite effect.

Deferred (or in forbearance) student loan debt grows in size from deferring interest, will cause the balance to exceed the original loan amount….that’s a credit score killer.Student loan debt is the same as any other liability.It’s reported to the credit bureaus and the monthly repayment amount impacts a borrowers debt-to-income ratio and reduces how much loan a home buyer or borrower can qualify for.I suspect this will have a far greater impact on Millennials and the many other first time homebuyers we are planning to purchase homes.Government insured VA mortgage loans, for now, will still omit student loan repayment amounts from your DTI ratio if you can document the student loan debt is or will be deferred for a minimum of 12 months after the time your mortgage loan funds. You need to make sure you can defer your student loan and that you don’t defer it too early, which would cause it to be deferred for less than 12 months from when your loan funds.Mortgage lenders are very concerned because monthly payments on deferred student loan debt will nearly double in the future, which effects a borrowers ability to repay their mortgage loan.

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