What Mortgage Rates Today Mean for College Graduates

If you have recently graduated from college, or are a few years into your life outside of full time education but still feel the full weight of the financial burden that your studies placed upon you, it might seem like home ownership is little more than a pipe dream.

This is a problem for millions of people, but there are some interesting aspects of the market at the moment which might make buying a house more attainable for college graduates. Here is a look at why this is the case and what you can do about it.

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Low rates equal improved mortgage affordability

Looking at mortgage loan rates today reveals that, due to a variety of socio-political and economic factors, they are relatively low, so monthly repayments should be comparatively affordable so long as you strike while the iron is hot.

Of course there are a whole heap of factors that are taken into account when securing a mortgage, as stated by Paperless Pipeline, with your credit score and the amount of debt you are currently liable for being at the top of the agenda.

This means that lenders will look carefully at your entire financial situation in order to determine whether or not you are a worthwhile prospect. If you have a bad credit score, or your repayments on your student loan are untenably high, you could struggle to jump on the low rates bandwagon.

Digging into debt ratios

In terms of your loan repayments in particular, it is all about ensuring that the ratio of your debt to your income is favorable, because a student loan is not seen as any different to other types of debt from a lender’s perspective. As long as you have enough cash coming in to cover the cost of your various outgoings in addition to the mortgage repayments, you should be able to satisfy the main criteria a lender will be looking for.

A good debt-to-income ratio would be around 36%, although you can get a mortgage with some lenders so long as it is under 46%. This is especially significant because the actual amount you owe is irrelevant; it is all about repayment affordability.

College graduates will be particularly pleased to hear this, since it is easy to build up tens or even hundreds of thousands of dollars in debt while attaining a degree, yet the sum total of your debt will not always be a deciding factor, so long as the repayment costs are manageable.

As interest rates remain low, being in debt is itself a more affordable state of existence, and so more graduates may find themselves in a position to apply for and be accepted into a mortgage agreement.

Considering other requirements

Favorable mortgage rates and the manageability of college debt aside, there are a few other things to think about if you are a college graduate who is hoping to get their first foot on the housing ladder.

The nature of your employment is significant, for example, and there are some lenders who will grant mortgages to fresh graduates so long as they have an offer of work and a history of work experience in their chosen field.

Likewise if you are buying a home with a partner and thus both of your incomes will be used to pay off the mortgage, this could be beneficial, so long as the repayments are affordable according to the aforementioned criteria, and you also have good credit scores.

Ultimately there may be a lot standing between college graduates and home ownership, but in the right circumstances this is certainly an aspiration which you can achieve.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes