Fannie Mae is providing more options to determine the monthly payment on student loans in regards to mortgage qualification. Previously, 1% of the balance was used for a mortgage calculation regardless of your repayment circumstances, leaving many prospective homeowners unable to qualify.
These expanded calculation methods favorably affect the ability to qualify for a home loan, opening up additional opportunities to many more potential home buyers.
Lenders are able to…
- Utilize the monthly payment amount shown on the credit report
- Use the 1% payment calculation if a zero payment is shown on your credit report
- Allow repayment of student loan debt with your limited or cash out refinance
- Allow exclusions of student loan debt for third party payments **
* At least one student loan must be paid off at the loan closing, with the proceeds paid directly to the student loan servicer.
** Third party must have been responsible for making the payments for the last 12 months.
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