According to American Student Assistance, the United States has $1.3 trillion of total student loan debt, accounting for 10% of all outstanding debt. This debt weighs heavily on those with student loans and is a huge factor in many major financial decisions, like homeownership. In the ASA’s 2016 Student Loan Debt and Housing Report, 71% of non-homeowners “cite student loan debt as the factor delaying them from buying a home.” In an attempt to combat this issue, Fannie Mae aims to be a part of the solution. With new policies recently implemented, Fannie Mae is making it faster and easier for borrowers to buy a home in today’s market. Their innovative solutions and new guidelines for home lending will assist those with non-mortgage debt and student loans.
The first new guideline states for student loans, only the payment that is reflected on your credit report will count towards your debt-to-income ratio. If the credit report doesn’t show a payment or reflects a zero, only 1% of your outstanding balance will be counted in your debt-to-income ratio. With this new guideline, borrowers are more likely to qualify for home loans with lower debt-to-income ratios.
The second new guideline relates to non-mortgage debts, such as installments loans (credit cards and auto loans) and student loans. This type of debt can now be excluded from your debt-to-income ratio if documentation shows this debt has been paid full and on-time by another party for the past 12 months. This new flexibility widens a home buyer’s eligibility to qualify for a home loan and allows for more borrowers to achieve homeownership.
If you have ever thought your debts or student loans were holding you back from becoming a homeowner, now is a great time to talk to a Summit Funding loan officer. With these new policies, new opportunities are available for more buyers to qualify for home loans!