MINNEAPOLIS - With more and more college graduates struggling to keep up with student loan payments, mortgage giant, Fannie Mae, has announced new rules that might make it easier for student loan borrowers to become homeowners.
"This will help get people with student loans into a house," said Zach Skattum, a Twin Cities real estate agent with RE/MAX Advantage Plus. "The good thing is [Fannie Mae] has changed the debt-to-income ratio."
A debt-to-income (DTI) ratio is the amount of money you owe on a monthly basis (i.e. rent, student loan payments) relative to the amount of money you earn (i.e. your income). Student loans boost your DTI. The higher your DTI, the harder it is to qualify for a mortgage.
"Before the rule changes, the lender would take 1% of the [total student] loan amount. So it was throwing off people's debt-to-income ratio. Now with the new [policy], [Fannie Mae] will take the actual [student loan] payment so that being said, the ratios will go down," explains Skattum.
Student loan borrowers will also have the opportunity to exclude non-mortgage debt paid by others as part of the loan application process.
Parents, if you've co-signed your child's student loan, you too can take advantage of the new Fannie Mae policies, like the student loan cash-out refinance.
Homeowners will have the chance to pay down student debt with a mortgage refinance.
However, homeowners might lose on any advantages from the original loan contract, like forbearance.
Some of Skattum's clients have already taken advantage of the new rules.
"They had over $100,000 in school debt. So under this new rule, they were able to increase their buying power and get into the home that fit their means," he said.
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