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.
The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org). Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.
Guidelines Changes on Student Loans for Conventional Mortgage Fannie Mae Mortgage loans in Kentucky for 2017.