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Andrew starts off by saying student debt could reduce home sales by 8% this year. He asks about the impact this may have and why more and more buyers are going to the bank with Mom and Dad.
John says that 30% of the time, student loans are causing buyers to get lower what they can be approved for or not get prequalified at all. These buyers are out of school, just starting their career, and certainly not at their peak income which eats away from their buying ability.
Sean There have been a lot of legal discussions over Student loan debts which talks about all the possible things that could happen with student loan debt that people feel like is impacting the market. One of the things being discussed by the Federal Congress has been debating to make student loan debt dischargeable
under certain conditions in the bankruptcy court. For years, student loans have not been dischargeable. Bankruptcy won't get rid of the obligation to pay though. Recently, the code was changed to take even private student loans are now dischargeable. There have been discussions and bills being introduced where bankruptcy may now be one avenue to get rid of student loan debt.
Andrew shares a statistic he saw in an article - borrower's purchasing power declines by 44,000 with every 250 per month of student debt. Because of how advantageous the student loan payback is, borrowers usually owe a high amount. Sean agrees and adds that because of the repayment terms, it goes on for a long time.
Andrew asks if the student loan debt the reason why more and more first time home buyers go to their mom and dad for loans and down payment help. Sean says that there were a couple of parts to it. One is that the parents could help with non occupant co borrower which is available on the FHA program as well as conventional. They are also seeing a lot more gift funds for the down payment.
They both warn people need to be cautious of the difficulties in mixing family and money. Sean sites that they've had many situations where they could avoid gift issues by making the children sign a promissory note and record a second mortgage in favor of mom and dad. That way, it's not a gift. Mom and Dad's money is protected, it's secured by the house. It might wait until after the closing to have these documents recorded but they can make it legal, a proper document, and secure it with the house.
For more Tampa Bay Real Estate news and advice, tune in to The Duncan Duo Real Estate Show on 970 WFLA - Tampa Bay every Sundays at 10 am.
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