Listen or read any show or article on millennials and the home buying process and you'll likely hear the phrase "high student loan debt." It has been hampering potential home buyers from being able to stay under the debt to income ratio threshold.
Recently both Freddie and Fannie Mae have revised their guidelines which may open up the possibility of home-ownership for many Americans. The key is if you have a student loan payment plan (often referred to income based repayment) that payment can be used instead of what is listed on your credit report.
If you have been turned down for a loan because of high debt to income ratios go back to your lender and ask them to recalculate your DTI (debt to income) ratio using the payment from your repayment plan.
In L.A. Times, Nichols Emphasizes Urgency of Regulatory Reform
Posted: 30 May 2017 06:07 AM PDT
Banks of all sizes need regulatory reform, and the need is especially pressing for community banks, ABA President and CEO Rob Nichols wrote in a Los Angeles Times op-ed. With the House expected to vote on a regulatory relief bill as early as next week, the op-ed drives home the message that excessive regulatory burdens negatively affect bank customers.
Nichols recounted a story from a southern California community bank that had to end mortgage lending because the software required to stay compliant would have meant the bank lost money on every loan. He wrote:
Nearly a decade after the crisis, we’ve ended up with too many duplicative and sometimes contradictory rules that don’t always promote safety and soundness, and may actually hinder banks from serving their customers and growing local economies.
Mortgage Interest rates continue to decline. Events in Washington are key factors.
If you are among the many Americans burdened with student loan debt and because of this you were not able to qualify for a mortgage loan, Fannie Mae and Freddie Mac have announced they have eased requirements for student loan debt in the debt to income ratio (DTI.)
Previously lenders were required to either use 1% of the outstanding balance on a student loan in the qualifying DTI calculation if there was not a payment listed on the credit report or if there was a monthly payment listed, that payment was used even if the borrower's actual payment was quite a bit less.
Now both mortgage giants will now allow borrowers to submit paperwork showing what their actual payment is and use that amount in the DTI. Often times, because of income based repayment plans, the monthly amount might be zero.
These new changes will open up the dream of home ownership for many Americans.
In response to the Federal Housing Finance Agency, both Freddie and Fannie have announced drafts for Duty to Serve: Solving America's most pressing housing issues.
The different aspects of this initiative focuses on:
Read more from both Freddie Mac and Fannie Mae.