Great news for borrowers with student loan debt…..
Freddie Mac just changed their requirements to make their mortgage loans easier to get!
According to their recent bulletin, student loans will now be calculated differently for debt ratio purposes.
For student loans that are on an income based repayment plan who have a payment due, that payment can now be used when calculating the debt ratio.
For example, a single person with no dependents who makes $30,000 a year and has $50,000 in student loans would have an income based repayment of about $115.
On the old calculation, the payment would have to count as $250 (1/2% of $50,000). It will now count as the actual payment of $115.
This first part of the guideline change is just matching what Fannie Mae has been offering since mid 2018. Since the vast majority of Freddie Mac borrowers can also qualify for Fannie Mae loans, that’s not a big deal.
The big announcement is part 2 of this…..
For student loans, that have zero payment due because of IBR, deferments or still in school, use 1/2% of the loan balance when calculating the debt ratio.
This is a major change since Freddie Mac was originally using 1%, which is the same that Fannie Mae, USDA and FHA use for people on a deferment or forbearance plan.
For example, for a borrower with $50,000 in student loans and on a deferment or forbearance, the debt would count as $500 under old rules (1% of $50,000). Under new rules, it will now only count as $250 (1/2% of $50,000).
The real winners of this new guideline will be borrowers who are trying to buy a home while still in school.
This change takes effect for any loans closing on or after November 1, 2018.
If you have any questions about this or anything else related to buying a home with student loan debt, please do not hesitate to reach out at 937-572-3713.