Fannie Mae requires that all deferred installment debt, including student loans not yet in repayment, be included in the calculation of the borrower’s debt-to-income ratio. In determining the payment for deferred student loans, Fannie Mae previously required that the lender obtain a copy of the borrower’s payment letter or forbearance agreement or calculate the monthly payment at 2% of the balance of the student loan. Research has shown that actual monthly payments are typically lower than 2%. In addition, many student loan repayment structures now use an income-based approach in calculating changes in the payment due over time. As a result, Fannie Mae is modifying the monthly payment calculation from 2% to just 1% of the outstanding balance.
All in all I think this is a great move by Fannie Mae and will help more borrowers qualify for a mortgage. Or help them qualify for a higher purchase price which is important in a market like the Austin metro where prices are high.
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