Changes to how student loan debt is treated by government-backed mortgage entity Fannie Mae could benefit homeowners and homebuyers alike.
Fannie Mae has announced two changes that affect homebuyers:
- Those who participate in federal reduced-payment plans will have their actual payments taken into account when calculating a debt-to-income ratio, rather than the maximum payment amount. The idea is that if the required payment rises, it’s responding to a rise in income. There are about 5 million borrowers who participate in reduced payment plans.
- Nonmortgage debts paid by another party for at least 12 months won’t be included in calculating a debt-to-income ratio. For example, if monthly student loan payments are covered by a parent, that amount won’t be included in the borrower’s DTI.
Fannie Mae is also expanding a program that makes it less expensive to retire student loan debt using home equity. Under the program, the fees typically associated with cash-out refinancing are waived if the funds go toward student loans, giving borrowers rates lower than most student loans. Cosigners of student loans can also take advantage of this program.
RE: The piece on student loans. You reference “federal reduced-payment plans”. Are those plans like a rehabilitation loan, or something different?