In case you haven’t noticed, college tuition costs have skyrocketed in recent years. As a result, an increasing number of homeowners have become saddled with student loan debt. This, in turn, is putting a drag on the housing market.
But now, Fannie Mae is making it easier for homeowners to pay off high interest student loans through the introduction of a new student loan cash-out refinance program that offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.
Basically, this program enables lenders doing business with Fannie Mae to offer special loans that enable homeowners to convert student loan debt into mortgage debt.
In addition, Fannie Mae has widened borrower eligibility to qualify for a home loan by excluding from a borrower’s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans and student loans, paid by someone else.
What’s more, the government-sponsored enterprise is offering a student debt payment calculation that makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.
“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage and we want to be a part of the solution,” says Jonathan Lawless, vice president of customer solutions, Fannie Mae, in a release. “These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.”
Fannie Mae hopes to stimulate homeownership by giving borrowers the ability to payoff student loan debt more quickly and at a lower interest rate. This will be attractive to parents who signed or co-signed student loans in order to put their children through college – but it could also aid millennials who are new homeowners struggling with student debt.