Student Loan Payment Calculation - Previously, lenders had to apply 1 percent of the total loan balance toward the borrower’s monthly DTI ratio, regardless of the actual monthly payment amount. DTI ratio is monthly expenditures (i.e. rent, student loan payments) relative to monthly earnings (i.e. your income).
To put that in perspective, a borrower earning $50,000 a year with $60,000 in student loans had $600 applied to his or her DTI. But for borrowers on income-driven plans, monthly payments can be as little as $161.
If the lower amount appears on the credit report, lenders may use it for qualifying purposes.
Most lenders have strict limits for DTI ratios, and that $439 difference could easily be the difference between qualifying for a mortgage or not!
Debts Paid by Others - Non-mortgage debts – such as auto loans, credit cards and student loans, which can be documented as satisfactorily paid by another party for the past 12 months, can be excluded from the DTI ratio.
Student Loan Cash-out Refinance – Allows current homeowners an alternative way to pay off one or more high-interest student loans with a cash-out refinance, potentially reducing their monthly debt payments.
When all requirements have been met, the price adjustment that applies to cash-out refinance transactions will be waived.
Parents who co-sign a student loan may also be eligible for the new programs.
There are 44 million Americans with a combined student debt of $1.4 trillion, the largest chunk of debt in the country except for mortgage loans.
Recent college graduates carry an average of $34,000 of student debt each, providing one of the largest obstacles on the road to homeownership.