In honor of all of 2018’s recent graduates, today’s blog post will cover the recent news which makes it easier for millions of student loan borrowers to own a home or refinance a mortgage. There are roughly 44 million citizens in the United States currently who are burdened with student loans, averaging at about $37,000 per person. With such a significant number, Fannie Mae is attempting to make it possible for those millions of citizens with debt to either own a home, or refinance their current mortgage.
Due to concerns that current, or potential borrowers have postponed their wishes of buying a home due to the burden of their education loans, Fannie Mae is easing the path for student loan borrowers in three ways. First off, the cash-out mortgage refinance option will be expanded to allow borrowers to trade out high note student loan debt for lower rate home loans. This will also broaden the refinance program benefits for the parents of students. This change alone could benefit up to 8.5 million people.
Additionally, borrowers applying for a mortgage are now able to exclude from their applications the debt being paid by others, such as credit cards or student loans being paid off by a parent or employer. This will help the borrowers to receive a better debt-to-income ratio, an important criterion in a loan application which will make an individual more likely to qualify for a mortgage.
For students on flexible payment programs, the final alteration will help borrowers tie monthly payments to their income. Fannie Mae previously required lenders to factor in higher monthly loan payments rather than the borrowers lower, flexible payments. When calculating an applicant’s debt-to-income ratio, this made it significantly more difficult for an individual to qualify for a mortgage. Now, lenders may use the lower payment which should help borrowers qualify for home loans. The reasoning behind this change would be so that the only instance which would result in increased payments would be due to increased income, a shift could impact more than 5 million student loan borrowers who are on flexible payment programs.
Reach out to your lender today if you benefit from any of these programs and we can help get you into a home!