Fannie Mae, the largest source of mortgage funds in the U.S., made changes last month to its underwriting requirements that aim to make it easier for home buyers with college debt to qualify for financing.
The company is no longer factoring in debt that’s being paid by someone else when calculating a loan applicant’s debt-to-income (DTI) ratio. If loan applicants are getting their car payments or student debts taken care of by someone else, for example, those payments will not be factored into their DTI calculation.
Borrowers making student loan payments that are smaller than their original repayment agreement will see their smaller payments being factored into DTI calculation. A number of public entities have programs to help those with student loan payments who aren’t making much money. Once those people start making more money, they can start paying their original payment amount. Prior to this change, Fannie Mae recognized only the original payment terms when calculating DTI.
Existing homeowners can get improved repayment terms on a cash-out refinancing if the loan is for paying down student debt. Additionally, Fannie Mae’s maximum allowable DTI will rise at the end of July from 45 percent to 50 percent.
With these changes in effect, customers who did not meet DTI requirements or who had a previously high DTI can reapply for a home mortgage loan and have a chance at getting different results.
The changes are detailed in the latest Voice for Real Estate news video from the National Association of REALTORS®. Other segments in the video cover efforts by NAR and the federal government to increase the national homeownership rate—which has been stuck at a 50-year low since the last housing downturn—and increasing interest among foreign investors in smaller commercial properties outside large metro areas.
Watch the video:
