Guidelines Changes on Student Loans for Conventional Mortgage Fannie Mae Mortgage loans in Kentucky for 2017.

For Kentucky Home Buyers using Fannie Mae or Conventional Loans that have student loans reporting a payment on the credit report, we can now use the payment reporting on the credit report even if it is income-based repayment plan. FHA and USDA still will use 1% if the student loans are IBR, but Fannie Mae now does allow us to take the payment listed on credit report. This will let a lot of Kentucky Homebuyers that have a lot of student loans left to pay qualify for a mortgage loan now. This is very good news.  
Kentucky Mortgage Guidelines Changes  on Student Loans for Conventional Mortgage Fannie Mae Mortgage loans. 
The FNMA student loan calculation has been amended to the following
  • If the credit report lists a payment amount, then the listed amount can be used for qualifying purposes
  • If the credit reports lists a $0 payment or no payment at all, either of the following calculations can be used
    • o   1% of the outstanding student loan balance; OR
    • o   A calculated payment that will fully amortize the loan based on the loan repayment terms
Note: This applies to deferred student loans as well, no matter the length of deferment.
Cash-Out Refinances for Student Loans and getting a Fannie Mae Approval
Fannie Mae  is now offering to waive cash-out pricing adjustments for borrowers which are paying off student loans. Any borrower that meets all of the following requirements will essentially be doing a Cash-Out refinance with Rate/Term pricing
  • DU Approval only
  • Standard Cash-Out LTV/CLTV applies
  • At least one student loan must be paid off
  • Only student loans for which a borrower is personally obligated can be paid off through the transaction
  • No partial payments are allowed; any student loan included in the Cash-Out refinance must be paid off in full
  • Loan proceeds must be paid directly to the student loan servicer at closing
  • Maximum cash back to borrower is the lesser of 2% or $2000
  • Only the following additional types of debts may be paid off with proceeds
    • o   Current first lien mortgage or HELOC
    • o   Purchase money seconds
    • o   PACE loans or other debt incurred solely for energy efficient improvements
    • Loan must be delivered with Special Feature Code 841
Non-Mortgage Debt Paid by Others
If 12 months can be documented of a borrower’s non-mortgage debt being paid by another party, that debt can now be excluded from the borrower’s DTI. The other party does not need to be obligated on that debt.
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Guidelines Changes on Student Loans for Conventional Mortgage Fannie Mae Mortgage loans in Kentucky for 2017.

3 thoughts on “Guidelines Changes on Student Loans for Conventional Mortgage Fannie Mae Mortgage loans in Kentucky for 2017.

  1. Pingback: Guidelines Changes on Student Loans for Conventional Mortgage Fannie Mae Mortgage loans in Kentucky for 2017. – Louisville Kentucky Mortgage Loans

    For all student loans, whether deferred, in forbearance, or in repayment (not deferred), the lender must include a monthly payment in the borrower’s recurring monthly debt obligation when qualifying the borrower.

    If a monthly payment is provided on the credit report, the lender may use that amount as the monthly payment for qualifying purposes.

    If the credit report does not provide a monthly payment for the student loan, or if the credit report shows $0 as the monthly payment (which may be the case for deferred loans or loans in forbearance), the lender must calculate a qualifying monthly payment using one of the options below:

    1% of the outstanding student loan balance (even if this amount is lower than the actual fully amortizing payment), or
    A fully amortizing payment using the documented loan repayment terms.

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