The Continuous Increase in Student Loans

Americans are accumulating more debts for college payments. This is the case despite records showing that in the past three years, they have been cutting on other types of loans such as mortgages, credit cards and vehicle loans. Here is an overview of the current debt scenario nationwide.

For student loans, the total debt was at $550 billion by the end of quarter two of this year. This is an increase of 25% as it was only at $440 billion during the third quarter of 2008, the period when household debt was at its highest. These numbers were provided by New York’s Federal Reserve Bank. On the contrary, the overall household debt has reduced by around 9%. In the past, it was at $12.50 trillion and it is already down to only $11.42 trillion. This decline is partly caused by the tightening of lending standards and banks’ write-offs of delinquent loans. When student loans and household loans are compared, a steady growth is seen in the former than the latter.

The figures above imply that recession is fueling the debt that students make. This may be due to the fact that college enrollment increases whenever jobs are not available. Moreover, the number of needy students is also growing at this time, said Mark Kantrowitz, publisher of Finaid.org, a tracker of industry relating to student loans.

For instance, there are around 9 million students who obtained Pell Grants. These mainly goes to students with lower than $40,000 in household income. This number is a huge increase from the $6 million grants given during the school year of 2008 to 2009.

Kantrowitz said that there is a possibility that the Fed in New York lowered the growth figures of the total student loan debt. He added that the numbers exclude the important interest costs that accumulate while students are still in school.

There is also a growth in the debt per student ratio. In 2009, the average level of debt for each student is around $24,000, reports the Project on Student Debt. At this rate, almost 2/3 of students finish school with loans.

Credit Score Requirements are Now Stricter for Homebuyers

Recent data shows that getting the best terms for a mortgage loan needs more than just excellent credit. Today, only individuals and families with exemplary credit standing can benefit from the historically low interest rates of 30 year mortgages.

The Mortgage Bankers Association reports in the Mortgage News Daily that about half of the newly written mortgage loans during the first quarter of the current year were given to consumers with credit scores that are higher than 750.

On the contrary, only up to one-third of the new loans in 2008’s third quarter, the period before the credit crisis started, were given to consumers with greater than 750 credit scores. FICO scores, the term referring to credit cards, is the basis of most lenders in the mortgage terms that they issue to the consumers. Scores usually range from 300 to 850. In the past, having a score of at least 720 is enough to obtain the best terms for mortgage loans.

At present, consumers who are at the lower end of the credit score range have a tougher time in getting a mortgage approval, according to the Mortgage Bankers Association’s recent data. The scores that used to easily qualify for mortgage loans are now making majority of the lenders contemplate. Actually, less than one out of ten loans, about 9%, were given to aspiring homeowners with below than 650 points credit standing, reported the Mortgage News Daily.
Experts say that the changes in the requirements of the FICO score is part of the consequences caused by the credit crisis that started in 2008 and the resulting decline of the economy.

Michael Rubin, the author of Beyond Paycheck to Paycheck: A Conversation about Income, Wealth and the Steps in Between, says that there has been a significant shift in mindset which is why banks are not very willing to take the risk anymore. He further added that most banks were not very careful until the second half of the year 2008. During that time, they were very much focused on lending.

Today, banks have changed strategies by being careful with their borrowers. They are now very keen in screening their consumers because they want to make sure that they will be repaid.

Rates are still low, but you’ll have to jump through a few hoops to qualify.

Is This a Good Time to Get a Mortgage?

Absolutely. In early June, the national average interest rate for a 30-year, fixed-rate conforming loan (under $417,000) was 4.9%, according to HSH Associates, a mortgage-tracking firm. The initial rate for a 5/1 adjustable-rate mortgage (featuring a fixed rate for five years, followed by annual adjustments) was 4.2%. “These are the best rates we’ll see for a decade,” says Guy Cecala, publisher of the newsletter Inside Mortgage Finance. “Don’t count on them getting better.” Business is slow right now, so lenders may even bid for your business if you have good credit.

The thing is, you do need to know what your credit is…. for those with bad credit, it is still hard, and possibliy harder than ever to get a loan now.

That has alot to do with the mortgage crisis and the mortgage meltdown…

But, hey, who’s counting?

Lending standards remain tight, and lenders have been picky even with the best-qualified borrowers. If you’re buying or refinancing the mortgage on your primary home, you’ll need a minimum down payment of 5% to 10% for a conforming loan or 10% to 15% for a conforming jumbo loan. With 20% or more down, you avoid private mortgage insurance, which typically costs 0.5% to 1.5% of your loan amount per year. Fannie Mae and Freddie Mac, which set the standards for mortgages they buy from lenders, require a minimum credit score of 620; you’ll get the best rate if your score exceeds 720. The Federal Housing Administration requires a minimum credit score of 580 to qualify with a down payment of 3.5%, but FHA lenders often impose a higher minimum score of 670. (If you apply with a spouse, lenders will probably base your rate on the lower of your scores.)

If you don’t really need a loan right now, maybe better to paydown debt and improve your debt to equity ratio.

And, if you have bad credit, then may be better to just focus on getting a much better credit score…

did you know that by improving your credit score by a few hundred points can mean the difference between saving hundreds of dollars in interest payments? Think about that….

There are many reasons why people might want to remortgage their home. By doing so you will be able to take advantage of some better rates than you previously had, either by switching to a new lender or staying with the one you are already with. In todays economy, remortgaging your property is a fantastic way or both making and saving money.

First of all, they do it in order to save money. If you are just paying a standard variable rate then it is likely that you will be able to take advantage of a better rate if you switch. This can allow you to either save money on all of the payments that you make each month or may even allow you to pay off your mortgage sooner.

The second reason to remortgage would be in order to raise money for whatever reason. If you find that you are earning more money or your property has risen in value then you may be able to increase the size of your mortgage. This could be to raise money for your kids wedding or to fund a new business venture or investment opportunity.

In the same way it might be a great way to avoid having to move out of the house. If you find that you need more space, it may be a good idea to build an extension rather than to move entirely. This sort of venture could be funded by remortgaging the house.

Last of all, you can also do this in order to consolidate your debts. By remortgaging you house you may be able to release some equity from the house which will allow you to pay off other debts such as loads and large credit card bills. This may be a good idea if you find that the rates on these borrowings are a lot higher than those of your mortgage, so this can help you to save money.

These are only four of the possible reasons to consider remortgaging your home.

You can find out the details about how you can save money when you remortgage following a few easy steps! Attaining remortgages is fast, easy, and can free up money for other important things.

Get help with your Decision About Mortgage Refinancing. It always helps to have an outside objective opinion. And remember when you refinance you will get a loan based on your income and your credit score. The better your credit score the better interest rate you will get. And remember the loan is against your income not the value of your house

Check your credit report for any errors that can drive up your interest rate. And realize with these tough economic times a great score years ago will only be a so so score today. Make sure that you contact the reporting agency for anything that looks wrong to your before applying for a loan.

You will also want to ask yourself if you want a variable loan or a fixed loan. You might only be able to qualify for a variable loan given your work income and your credit score. This is what gets some people in trouble.

The variable is attractive because it has a lower initial rate and lower monthly payment. But it will go up make certain of that. And this is where some people have gotten in trouble. They think that they will have more money when it does go up. But you cannot count on a raise every year in this economy.

Do not kid yourself in this case. If you cannot pay the payment you are looking at losing your home. No one wants that. If you are refinancing a fixed rate mortgage you have to realize that you will start all over with a new loan. If you have ten years on a thirty year fixed, you will start all over with a new loan.

You will now have another fixed term of the loan whether that is another thirty years or whatever the term of the loan is. If you are taking money out with the refinance you have to realize that you are taking out the equity of your home now and using that money today. This is what gets some people in trouble. They refinance and take out the equity of their home.

When they sell their home for whatever reason they realize that they will either have to pay the bank money because their home is worth below the amount they owe the bank because their home may have gone down in value since they refinanced. Some people believe that the value of their home will continue to go up so they will always have a growing equity amount in their home; but as the economy has shown that this is certainly not the case.

What you do with the money you take out of the refinance is up to you. But if you are thinking of refinancing it is a good idea to consult with an independent financial advisor to go over all of your options. The more you understand your choices and the results of your choices the better.

In addition to having less debt by refinancing a mortgage, also look at GIC rates to get higher fixed income returns. Mortgage rates vary from lender to lender so ask around.