Fannie Mae Making Home Ownership Possible for Those with Student Debt
In honor of graduation season, today’s blog post will be covering the recent news which will make it easier for borrowers with student loan to own a home or refinance a mortgage. Currently in the United States, there are roughly 44 million citizens with student loans, averaging at about $37,000 per person. With such a significant number, Fannie Mae is now aiming to make it possible for those millions of citizens with debt to either own a home, or refinance their current mortgage.
Due to how large the number of individuals with debt is, there have been concerns that there are countless potential borrowers who are postponing their wishes of buying a home due to the burden of their loans. Fannie Mae is easing the path for student loan borrowers in three ways. First, it is expanding cash-out mortgage refinance options, which will allow borrowers to trade out high note student loan debt for lower rate home loans. Not only does this benefit students themselves, but this will also broaden the refinance program benefits for the parents of students. In total, this change alone could benefit upwards of 8.5 million people.
Secondly, 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 which is an important criterion in a loan application. Another change which will make an individual more likely to qualify for a mortgage.
For students who are on flexible payment programs, the last alteration by Fannie Mae will help those borrowers tie monthly payments to their income. Previously, Fannie Mae 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 makes it much harder 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 by which there would be an increase in payments would be if an individual’s income had also increased. This shift would impact more than 5 million student loan borrowers who are on flexible payment programs.
If you may benefit from any of these programs, reach out to your lender today and we can help get you into a home!