The Federal National Mortgage Association, also known as Fannie Mae announced today that they will make it easier for borrowers with student loans to qualify for a mortgage. This is great new for current and former students who have been overburdened by student loan debt.
The Economist reported in June 2014 that U.S. student loan debt exceeded $1.2 trillion, with over 7 million debtors in default. In 2014, there was approximately $1.3 trillion of outstanding student loan debt in the U.S. that affected 44 million borrowers who had an average outstanding loan balance of $37,172.
Realizing this massive problem, Fannie Mae created simple solutions to provide access to credit for qualified borrowers.
“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,” said Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae. “These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.”
Here is a list of the changes Fannie Mae made to accommodate borrowers with student loan debt:
* Student Loan Cash-Out Refinance: Offers homeowners the flexibility to pay off high-interest rate student debt while potentially refinancing to a lower mortgage interest rate.
* Debt Paid by Others: Widens borrower eligibility to qualify for a home loan by excluding from the borrower’s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else.
* Student Debt Payment Calculation: Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.