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Student debt is a growing concern for people all over the country – not just for those attending or graduating college, but also for older Americans who acquired student debt by going back to school. The burden of student debt has prevented many from getting their first mortgage and buying a home, and restricts others from getting more credit and spending ability. Because of this increasing threat to the American home buyer and owner, Fannie Mae has changed some of its underwriting conditions on conventional loans. These changes are helping those with student debt in two ways.
Help Getting a Mortgage with Student Debt
For those with student debt, getting a mortgage can be difficult due to their debt-to-income ratio (DTI). Your DTI is taken into account when applying for a mortgage in an effort to determine whether the borrower can afford the mortgage loan. Those with student debt have a much higher DTI than those without, making it less likely for them to be approved for a mortgage.
With Fannie Mae’s new underwriting guidelines as of April 2017, borrowers can now have their non-mortgage debt paid by others excluded from their DTI. This means that if someone else, like your parents, are paying for your student loan, credit cards or car loan, these debts won’t count against you in your DTI calculations.
Another new program allows lenders to take into account a positive student loan payment history. This payment history shows up on your credit report, and can positively affect your credit score when it comes to applying for a mortgage.
Help for Homeowners with Student Debt
Student debt is not just a problem for young people or first time homebuyers. Many homeowners are also under the burden of paying off student debt for years to come. Last fall, Fannie Mae debuted a mortgage program that provides a way to pay down student loans with a mortgage refinance.
The program allows homeowners to refinance a home mortgage at a lower rate and cash out. With the cash, you are able to pay down your student loans, a great options for those who worry about paying off their student loan and want a lower rate. It’s similar to refinancing student loan debt to a lower rate.
A mortgage refinance rate is usually lower than a student loan rate so this option could see you coming out ahead.
How Mortgage Options, Inc. Can Help
If you are concerned about your student debt and how it affects your mortgage prospects, call Mortgage Options, Inc. today at 803-732-5787. One of our loan officers is happy to provide a free consultation to talk through your unique situation, offer advice, and find the best mortgage for you. Mortgage Options, Inc. has offices in South Carolina, North Carolina, Georgia, and Tennessee and we’re here to help!