How Does Student Debt Impact Your Mortgage?

Let’s say you’re a recent college grad. You’ve landed your first real job (or maybe you’ve been working it for a while already) and after years of dorms and apartments, you’re realizing you might as well start building equity in a place of your own.

You wouldn’t be alone. Though you’ll see articles all over the place insisting that millennials just aren’t interested in buying homes, a closer look at the data says the opposite is true actually true.

However, there’s one small hiccup: student loan debt. In 2013, the average student borrower graduated $28,400 in debt, which will almost certainly lead to problems when they try to qualify for a mortgage. So what can you do if all this describes you?

First, let’s take a closer look at the why of this problem.

How does student debt interfere with getting a mortgage?

When lenders do all the math to figure out whether or not you’ll be able to make your monthly payment, they take special care with something called a debt-to-income, or DTI, ratio.

This is almost exactly what it sounds like—it allows banks to get a feel for how much of a borrower’s income is already accounted for by other debts. Ideally, your DTI ratio should be 43% or below, as that’s the cutoff point most banks will use.

Even if your loan is still deferred, which means you haven’t begun payments on it yet, lenders will still estimate monthly commitment from you, though it may be even higher than the standard minimum payment.

What can you do?

Well, there’s the obvious, solution: pay down your debt before applying for a mortgage. Of course, obvious doesn’t always mean easy. Paying off your student loans will take time and careful budgeting, especially if you’re trying to save up for a down payment at the same time. That may mean some serious cutting back on living expenses or avoiding big purchases.

Of course, the other way to improve your DTI ratio is to increase your income. Earning a raise, moving on to a better paying job, or even taking on a part time one are all ways to do just that. Make sure you do so several months before applying, though, or your lender may not count the income.

If neither of those options work for you, you can always try to consolidate your student debt, or convince a parent to co-sign with you. Whatever you do, though, make sure to keep your credit in good standing, or you’ll have to add “bad credit” to your list of problems to fix.

source: totalmortgage.com

Which college grads snag the best salaries

Source:PayScale.com

NEW YORK (CNNMoney.com) — Attending school in California and becoming an engineering major can really pay off for college graduates — by thousands of dollars a year.

According to a report released Thursday from salary-tracker PayScale.com, petroleum engineering majors and graduates of Harvey Mudd College are taking home the biggest paychecks.

While mid-career salaries fell 1.5% overall between 2009 and 2010, engineers, scientists and mathematicians continued to rake in the big bucks, as well as students who graduated from Ivy League schools.

“Our society values something practical — that’s why poetry isn’t popping up on the top of the list,” said Al Lee, director of quantitative analysis at PayScale. “As in the past, engineering and [similar] fields with a strong math component plus a physical world component remain on the top, with lots of money to be made in these fields.”

The data in the report, collected from 999 bachelor degree institutions in the last year, track median starting salaries of employees who graduated in the last five years and median mid-career salaries of graduates with more than 10 years of experience in a given field.

Follow the money: So where are all the lavishly paid engineers bred? According to PayScale.com, it’s Claremont, Calif., where Harvey Mudd alums go on to earn a mid-level salary of around $126,000.

“Harvey Mudd is the nexus of all good places to be in terms of graduate earnings,” said Lee. “Not only do engineering majors make good money and this happens to be a specialized school for engineering, but southern California is an area that tends to have some of the highest wage earners in the country.”

Meanwhile, Dartmouth College, which claimed the title as the school with the highest paid graduates for the past two years, was knocked down the list to number two — tied with Princeton — with its graduates receiving a starting salary of $54,100 and a mid-career salary of $123,000.

Since a large chunk of Dartmouth students typically head into financial services post-college, many graduates felt a blow to their wallets in the last year as financial companies cut back on pay, said Lee.

Harvard, California Institute of Technology, Colgate, Massachusetts Institute of Technology, Stanford, Duke and Bucknell rounded out the top ten list of schools with the highest-paid mid-career graduates.

On the other end of the spectrum, if you choose Coker College in South Carolina — the worst-paying school on the list — be prepared for a starting salary of around $28,900 and a mid-level salary of $40,300.

Majors that pay: Topping the list of best-paying degrees this year, petroleum engineers earn a starting salary of $93,000 and a mid-level salary of $157,000.

That’s $49,000 more than the next most lucrative majors, aerospace engineering and chemical engineering, which both produce graduates earning a salary of around $108,000.

“Petroleum engineering has been an incredibly profitable sector for the last few years,” said Lee. “It’s a very cyclical field and depends largely on the price of oil, and we’re very much on an up cycle right now.”

Electrical engineering was the third-highest paying major on the list, with mid-level pay of $104,000 per year, followed by nuclear engineering, applied mathematics, biomedical engineering, physics and computer engineering.

But I don’t want to be an engineer! If science and math aren’t your thing, don’t worry. There are plenty of other majors — many you wouldn’t expect — that will put you on the money-making track.

“People always think they have to be an engineer if they want to make good money down the line, but there are a lot of other majors that will help you find good careers with salaries that anyone would be comfortable living on,” said Lee.

A building construction major typically leads to a mid-career salary of more than $94,000, while mid-level government majors earn $87,300 on average. International relations, supply chain management and urban planning also boast average salaries of more than $80,000 a year.

Even majors like film production and zoology can help you land a good-paying job. While film-makers earn a starting salary of only $36,100 and recently-graduated zoology majors tend to make about $34,600, mid-level salaries come in at about $77,800 and $68,800, respectively.