Mortgage Blog

College Grads Could Get Home Buying Help

Several states are offering homeownership assistance programs to recent college grads that may help them receive thousands of dollars toward the purchase of a home. In New York, Gov. Andrew Cuomo recently announced the "Graduate to Homeownership" program, which provides assistance to first-time buyers who have graduated in the past two years from an accredited college or university with an associate's, bachelor's, master's, or doctorate degree. Program participants may be eligible for up to $15,000 in down-payment assistance or a reduced-rate mortgage—but they have to agree to live in one of eight upstate New York communities in order to be eligible.

"Upstate colleges and universities have world-class programs that produce highly skilled graduates, who then leave for opportunities elsewhere," Cuomo said in a statement. "This program will incentivize recent graduates to put down roots."

Nearly half of states offer some form of housing assistance to student-loan borrowers, according to an analysis by Ohio offers Grants for Grads, which, like the New York program, offers down-payment assistance or lower-rate mortgages to people who have graduated from college in the past four years. Rhode Island's Ocean State Grad Grant program offers up to $7,000 in down-payment assistance to college graduates who earned a degree in the past three years.

Many of these state programs, however, require college grads to live in certain cities within the state, similar to New York's program. "It can certainly help people who are dealing with high student debt burdens," says David Reiss, research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School. "But programs like this have to deal with a fundamental issue: Do these communities have enough jobs for recent college graduates? Time will tell."

Source: “College Grads Can Get Home Grants – But There’s a Catch,”® (May 5, 2017)

get prequalified
Posted by Jill Kohler on May 9th, 2017 2:24 PM

Programs expand mortgage eligibility for those burdened by student debt

Last week, Fannie Mae unveiled three new programs to help aid current homeowners and future homebuyers who are blocked from eligibility and financing by the burden of student debt.

Fannie Mae first announced an expansion of its cash-out refinance program with SoFi. The GSE also announced the implementation of two other programs to help widen eligibility for borrowers. One helps potential borrowers whose debt is paid by others. The third solution allows lenders to accept student loan payment information on credit reports, making it easier for student debt holders to qualify for a loan.  

So, how do these new programs help current homeowners and future homebuyers who are bogged down by student debt when financing a home? Here’s an outline of what each new solution does and how it can help.

Student loan cash-out refinance

This option offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.

Johnathan Lawless, Fannie Mae’s director of consumer outreach, said this option is ideal for parents who may have home equity to cash in on because it could be used to pay for their child’s education debt. But Lawless did warn that refinancing may negate any benefits the borrower receives in the original loan contract, such as the ability to enter into forbearance or an income-based repayment plan.  

Debt paid by others

Fannie Mae has widened borrower eligibility by excluding from the borrower’s debt-to-income ratio any non-mortgage debt, such as credit cards, auto loans, and student loans, that are paid by someone else.

Student debt payment calculation

Fannie Mae has changed how student debt is calculated when applying for a mortgage, making it more likely for borrowers with student debt to qualify for a loan by enabling lenders to accept student loan payment information on credit reports.

Lawless explained that if you’re on an income-based repayment plan, the lower payments will now count toward your debt-to-income ratio to help determine mortgage eligibility.

“The day we announced this, I received a call from a lender who had a borrower on one of these plans and their monthly payment was $100, but because of the policy on how to put the debt into the ratio, they were actually using $600,” Lawless said. “We announced the change and they went back into the application and updated it to $100 and it went from not being approved to being approved.”

Betsy Mayotte, director of consumer outreach and compliance for American Student Assistance, an organization aimed at helping students and universities overcome student debt, said the changes are exciting and reasonable.

“This could be a great option for Parent PLUS and Grad PLUS loans,” she said.

Mayotte stressed that borrowers should become more educated about their options when exploring how to pay for student debt.

“People get so caught up in interest rates,” Mayotte explained. “They get tunnel vision and may not see what they’re giving up. Federal loans have discharge options if something terrible happens, such as disability and death.”

Mayotte encouraged borrowers to look into any program with their eyes wide open and to think about the long-term implications, cautioning that “if you used home equity to pay off $60,000 in student loans, that could be a $600 payment a month and if you can’t afford that, you could lose your house.”


get prequalified
Posted by Jill Kohler on May 4th, 2017 8:06 AM

Know before you owe- Pa Mortgages

Pa Mortgage

The CFPB’s mortgage initiative is designed to help consumers understand their loan options, shop for the mortgage that’s best for them, and avoid costly surprises at the closing table.  Get Free information from the Consumer Financial Protection Bureau.

Posted by Jill Kohler on April 17th, 2017 5:37 AM

4 Tips on Building a Solid Credit History to qualify for a Pa Mortgage

   Establishing a good credit history has never been as important as it is today.It’s not just that you’ll need good credit to get decent rates when you’re ready to buy a home or a car. Your credit history can also determine whether you get a good job, a decent apartment, reasonable rates on insurance or how you qualify for a Pa mortgage. See how you stack up.


Building your credit

If you’re just starting out, you have a once-in-a-lifetime opportunity to build a credit history the right way. It’s a classic Catch-22: You’ve got to have credit to get credit. So where do you start? If you are rebuilding your credit, all of the same issues apply. 

1) Piggyback on someone else’s good credit.
2) Apply for a secured credit card.
3) Get an installment loan using a co-signer.
4) Use revolving accounts lightly but regularly.
5) Pay your bills on time EVERY month.

Learn more great credit building tips

For other credit and mortgage topics, visit
Posted by Jill Kohler on April 11th, 2017 7:41 AM

Forbes says Fed unlikely to carry through
on raising interest rates in 2017

2017 rising interest rates

The overall consensus of the upcoming 2017 Federal Reserve Board meetings is that interest rates will be rising in the near future.  It's not all that surprising as interest rates have been at record lows for the last 6 to 7 years. What remains to be seen is what affect the Trump presidency will have on raising interest rates in the next couple of years.  The largest market in the homebuying sector is Millenials and rising interest rates certainly don't help the cause, however perhaps a bigger challenge for this extremely large market of potential First Time Home Buyers is the downpayments required to get a mortgage.

Some Factors in 2017 affected by rising interest rates

The Fed's 3 projected quarter point increases in 2017 will likely stall home values since higher interest rates will most certainly affect borrowing power, and limit affordability for potential home buyers. On the flip side, the new adminstration seems to be all for lowering PMI mortgage insurance premiums on low down payment FHA Loans, which have risen dramatically in the last several years, which should definitely help things. Another factor that comes into play is that more banks and lenders are accepting gifts as downpayments which is a bit of a newer concept. Also the ability for buyers to structure a purchase using sellers assist which essentially lets the buyer finance their closing costs

In the last couple of years, banks and lenders have gotten a bit less restrictive in their policies and underwritings procedures. After all, they do need to make loans to consumers to make money. We are not predicting a repeat of the mid 2000's when anyone could get a loan. But this responsible loosening should help borrowers in the big picture, even if interest rates do rise, which eventually they will. Our goal moving forward is to educate consumers so they completely understand the process.   All in all, with a new presidency comes changes in monetary policy and only time will tell how it will all shake out for the economy, housing, jobs, borrowers, and mortgages.

 Here is a link to the article from Forbes.
Impact of Increasing Interest Rates
Posted by Michael and Jill Kohler on January 16th, 2017 2:05 PM

Top ways college students can build their credit history

College students and credit

So you’ve finally made it to college.  Your parents have been harping on you forever about the importance of getting good grades so you can graduate and get a great job making a lot of money in a field you love….. so right now you have no worries.  I mean, you have the worries of writing that research paper by Thursday and of course doing well at school. But no “real life” worries.  Or at least that’s what your parents say.

But one day in the near future, there will be no more assignments, pop quizzes or research papers due and you will finally graduate.  You will likely celebrate your achievement of graduating from college (which is a huge one), frame your diploma on the wall, and head off to that place everyone’s been telling you for years that you know so very little about. The REAL WORLD.

Hopefully while in college you were smart and/or lucky enough to do an internship with a company in your field of study that might offer your first career prospect. I.e Job.  Otherwise, you will begin searching for a job like millions of other graduates do every year.  Eventually, or hopefully sooner, you will land that job and begin to put that expensive education to work for you.

After finding employment, maybe your goal is to begin paying off your student loan debt, saving money to buy a new car, or perhaps you’re thinking of buying a house or condo of your own in the future.  Or you’ll move out of your parents’ house and rent an apartment for a while. No matter what path your life takes from this point, your credit is going to become a huge piece of that puzzle.

Understanding your credit profile and how it will affect you in the future

Why is this so important?  Well, for starters, you may have heard that things are EXPENSIVE. And if we wait to save up the money for everything we’d like to buy in life and pay cash.  Well, we are likely going to be waiting a long time for things, or have very few things.  “So ok, I’ll just take out a loan” you say.  And that’s where the basic need for credit comes into play.  In short, to buy the things we can’t afford to pay cash for.   We borrow.

“So when I go to get a loan, what do banks and lenders look for?” 

Credit, Capacity, Collateral

The top things that lenders will look for when you borrow money are the three C’s.  That is, your Credit, your Capacity, and your Collateral.  You may have heard and maybe even gained some understanding of these terms in your finance or economics class.   Those are the primary factors a bank or lender will look at to determine your ability to borrow so here’s how they may apply to you in the “Real World” we were talking about earlier.

Credit:   There are 3 major companies out there that keep track of your credit by your social security number. You do remember that number right?  They are Experian, Equifax, and Trans Union.  Each one of these companies keeps a report on any credit account you open.  Not your school lunch account, but your Macy’s cards, or your gas card, or your student Visa or Discover card, and of course, your school loans.  Each account has a detailed history that lenders can see your credit limit, how much you borrowed, how much you owe, and how well you paid on the account among other things.  If you make your payments every month on time, you’ll be rewarded with a high credit score.  This will likely generate offers from other banks and credit cards who will want to loan you money because you’ve demonstrated you can pay on time.  In the case of credit cards, this is known as unsecured debt.  If you buy a watch on your credit card at the mall, and decide to stop paying, they are probably not going to come looking for you to return the watch.  However they will make negative reports on your credit.  And the next time you go to open a credit card or apply for a loan, that poor payment history will reflect on your report, and you will likely have some trouble getting the credit you seek.  Conversely if you pay your bill every month on time, your payment history will reflect positively. 

Capacity:  The 2nd C.  This is a tricky one.   A bank or lender will look at your income and make a determination (through a series of ratio’s and calculations) of whether they feel you have the capacity to pay for the item you are borrowing to buy.  Let’s say in the case of getting a car loan.   Example: You want to buy a $7000 used car to save money. You find a nice car you like on Auto Trader and you have $1000 saved to put towards the car and need to borrow the remaining $6000. You have a part time job making $150 a week and a couple of credit card bills you are paying on from things you bought while you were at college. The total of your credit card payments is $50 a month.  This car loan might be $275 a month, plus your $50 a month on your cards, so you’d need at least $325 a month just to make the payments.  Lenders also know that this car will need to be insured. That might cost you another $120 per month, and your car will also need gas. Let’s say a $30 tankful per week because you want to drive it right.  That’s $120 a month.  We haven’t gotten into repairs yet but I’ll save that for another article.  So the lender adds this all up and determines.  This applicant make $600 a month, but by the time they pay their credit card bills, pay the loan on the car, insure it, and put gas in it. They are going to spend $565 per month buying, insuring, and fueling this car, plus their credit card bills.  That leaves about $35 bucks a month left in their wallet.  Or $8 a week.   What happens when the car needs a $500 repair.  You do know that cars sometimes need repairs right?    In any case, there’s a good chance that you may get denied for this loan (even if your prior history is good)  Why?  Because the lender has determined that you don’t have the CAPACITY to pay for it and afford other normal things in life with your 8 bucks a week that’s left after paying for it.

Collateral: The 3rd C.  Collateral in a basic sense is something of value pledged for the payment of a loan. So for instance, when you go to buy a house one day, it’s primarily the value of the home you’re buying that you are pledging to the bank to guarantee that you will make the payments.  Of course a lender will want to see your good credit history, and that you’ve made your car payments on time, because buying a home is a much bigger step.  But they are going to be very concerned that the value of the home (the collateral) is worth more than what you are borrowing to buy it.  That value of the home insures the bank that if for some reason you cannot make the payments on the loan, they can take that collateral back to satisfy what you owe them, which in this case is the house.  I think it goes without saying that you want to try to avoid this situation as it can have disastrous consequences on your ability to borrow in the future.So there you have it, that’s the basics of Credit, Capacity and Collateral

Things you can do right now to build a good credit history 

Open up a small charge account or two and make the minimum payments every month, even if it’s $10.  Demonstrating you can borrow money and repay it on a schedule is a great first step.  Paying off your balance in full doesn’t do much to build your payment history or FICO score.  Unless you charge something one month, pay off the full balance, then do it again next month.  Let’s say your gas card.  You charge $60 worth of gas on your credit card, then pay off.  Then the following month charge $60 more gas, and pay that off, etc.  This will definitely help build your credit (and save you some interest as well) but that’s another topic.

Your initial credit card limit may be rather small, maybe $300 to 500 dollars.  Or in some cases, you may need to get a secured credit card, which basically means you put up the cash as collateral (remember that) and you basically borrow your own money back but you build your credit by doing it. Some of these credit cards may have an annual fee.  By paying on time every month, you will build your credit history and qualify for higher limit credit cards (some with much lower interest rates) like Visa and Mastercard.   Continue demonstrating a solid payment history on these cards and in time, apply for better cards with less fees, lower interest rates and higher credit limits. A successful payment history  will help you qualify for the loan on that new car you may be hoping to buy after graduation.  Make sure you monitor your credit periodically and make sure that the accounts that are on your credit report are yours and are reporting accurately.  You can request a free copy of your credit reports once per year from Experian, Equifax, and Trans union.  You can also dispute items that appear incorrectly.

For many students, one day this credit experience may lead to buying that home you may dream about to raise a family in.  When you sit down with your lender one day in the future to discuss your possible mortgage loan, he or she will be making determinations on, yep you guessed it, your credit, your capacity and your collateral so pay your bills on time, use your credit responsibly and you will find this process much easier.  Years ago home buyers would need to put down 20% of the purchase price as collateral to get a home loan.  Today, there are a number of low down payment programs backed and insured by the government called FHA Loans which will allow you to qualify for a mortgage with as little as 3.5% down.  More options are becoming available to make the dream of home ownership a reality for your upcoming generation but developing a solid credit history will go a long way toward reaching that dream.  Best of luck to you and hope this information helps in your journey.

For more topics on credit, visit our blog at

Author:  Mike Kohler

Source:  Net Equity Financial

Posted by Michael and Jill Kohler on October 31st, 2016 6:22 AM


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