When applying for a home mortgage loan, almost every aspect of the applicant’s financial life is analyzed – one of those being debt. Unfortunately, applicants with student loan debt are often rejected from being able to obtain a home mortgage loan due to their debt-to-income ratio. Recently, Fannie Mae announced new policies that aim to help potential borrowers with student loan debt qualify for a home loan and combat the negative effect that student loan debt has had on the housing market.
Jonathan Lawless, vice president of customer solutions at Fannie Mae, commented:
“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution. These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.
The new policies include:
Student Loan Cash-Out Refinance – By providing the borrower with extra cash, this option will provide current homeowners with the opportunity to pay off student debt while refinancing to a lower mortgage interest rate.
Debt Paid by Others – This option will increase the borrower’s eligibility by eliminating non-mortgage debt (e.g., credit cards, auto loan, student loan) that is paid by someone other than the borrower.
Student Debt Payment Calculation – This option allows lenders to view and consider student loan payment information on credit reports. By allowing this, it makes borrowers with student loan debt more likely to qualify for a loan because their situation can be analyzed in its entirety.
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