The Federal National Mortgage Association, commonly referred to as Fannie Mae, is taking significant steps to make it easier for folks with large student loan debts to qualify for home loans. If you or someone you know has found it difficult to purchase a home in the past, it may be time to revisit your plans.
Fannie Mae and its government-sponsored companion program, Freddie Mac, already have flexible ways to help potential buyers. Now Fannie is simplifying the formula it uses for home purchase borrowers with student debt. Here’s the change. Lenders qualify borrowers based on their debt ratios … basically comparing how much a household earns each month and much it is required to pay for car loans, credit cards, etc. Previously, 1% of a person’s outstanding student loan balance had to be considered as their minimum monthly payment. For many folks with $50,000 or more in debt, this was enough to deny the loan due excessive debt-to-income ratio. Now, lenders are permitted more flexibility in using standard credit reports to evaluate a person’s financial viability.
Another big benefit for potential home buyers is tied to who actually pays the bills. As one example, previously a student loan payment that was in a parent’s name, but paid for by the adult child, was applied against all parties. Now, with documentation, lenders are able to attribute payments to the responsible party and offer an exclusion to others. It’s another way Fannie Mae is loosening the restrictions people encounter in buying a home. This Team Move blog has even more information about the many programs and policies from Fannie Mae, Freddie Mac and the VA, and how individuals can benefit from them. You can also contact Sanford’s Team Move office at 919-777-0114 to get answers to any questions you may have.