Obtaining bank financing with student debt?

[James Petty]

How much will having student loans affect my ability to get a loan for building / heavily renovating a property?

I have been scouring the forums with the topic of student loans and continuously see the same messages:

• 6 Tips For Buying Your First Property When You Have Student Debt
•  Newbie with Student Loan Debt: FHA, 203K, Conventional or SBA?
• Pay Student Loan Debt or Invest
• Pay off student loan or purchase real estate

Essentially in each of these texts, the advice is to get your Debt to Income Ratio (DTI) down by getting your debts under control. In terms of low interest student debt, everyone tends to recommend investing in assets that can outperform these debt interest rates. That all makes sense. Now lets talk about logistics.

I have a large balance of student debt, and I am currently in the process of refinancing this into a private fixed interest rate of 3.95%. My intention is to build duplexes or quads in late 2018/early 2019. Between now and then, I will be stashing large sums of cash to be used as equity for that endeavor. 

From a banker's perspective, what is better? More cash on hand, or lower debt balance? Should I be sending more money to the student debt rather than raising capital? 

Regarding the debt itself, would this debt look more favorable as formal "student debt" by the government, or does it matter? By refinancing, I am turning this into effectively a signature loan. I am concerned that this may look worse to a banker down the road than "oh he went to college/grad school, how nice."

Many thanks for any advice!!

[Chris Mason]

Hi @Josh Day,

Normally cash out refinances have higher rates or fees. Fannie Mae waived that if we document that all cash out proceeds are only being used to pay off student loan debt (this goes away if you try and slip a trip to Tahiti or a new car in there). 

Second question, yup that's right.