Qualifying for a Home Mortgage

It’s very difficult for me to explain to borrowers why they don’t qualify for a refinance or a home purchase despite the fact that they have excellent credit and have never been late on a mortgage payment.  It’s even tougher to talk to a young adult or recent college graduate who wants to own a home but has so much student loan debt that they have very little free cash at the end of every month.

What can be done to help these people?  I have some ideas; if you have made your monthly mortgage payments on time for the last 24 months and you have excellent credit I think the guidelines for debt to income should be expanded to say 60 percent on a no cash out rate and term refinance, right now it’s at 45%.  What’s the harm, the borrower already has a mortgage, is paying on time, they aren’t increasing their loan amount just seeking a lower market rate interest rate to refinance.

As for the college debt I really don’t have a good solution, the debt has to be paid every month and they don’t generally have a current mortgage so aren’t looking to refinance they just want to buy a new home.  Is a recent college graduated or a person with a college degree a lower risk than a non-college graduate, I’m sure there is data on it but the debt must be paid and I don’t advocate going back to 2008 and allowing higher debt to income ratios for purchases.  The answer is to get a parent to co-sign which is allowed today.

Many want student debt forgiveness, free college, I’m all for that, I have two small children and would love their college to be free, however, I would also like to know how the government can possible pay for it when Obamacare isn’t working, this is the second year that my health care provide will cease to exist, and the social security fund is going to run out cash soon, so I simply don’t see free college on the horizon

If you have an idea, send me an email and I will put some of your ideas in next weeks notes.