U.S. News University Directory on August 20, 2012
by Catherine Groux
Many college graduates leave school with thousands of dollars of debt, which they know they must pay back in the years to come. These individuals probably understand that their monthly repayments will impact their future spending habits, but what they may not know is that too much student loan debt can also prevent them from buying a house.
According to a new report by Young Invincibles, the 2004 college graduates who left school with student loans will most likely have a hard time finding a mortgage when they search for homes next year, or when they hit 30, the age of the average home owner. This is due to the fact that the typical single student debtor is not eligible for most home mortgages because of their debt-to-income ratio.
If these college graduates took out a mortgage, their average debt-to-income ratio would hit .49, which means they would be spending almost half of their monthly income on just student loans and mortgage payments. Therefore, they would most likely not qualify for FHA loans or private mortgages.
For this reason, as well as many others, most college students know it is crucial for them to consider the cost of their prospective schools, as well is if they could afford to repay the loans they will need to take out. According to a recent survey by Sallie Mae, about 69% of families said they eliminated college choices because of the high cost of attending the institution.