Page 30 - October Newsletter

Good news for those with student debt
If you have a student loan or are a cosigner on one, there is some good news on the horizon. Fannie Mae, the nation’s largest underwriter of mortgages, recently introduced three new rules that affect those with student debt. These new rules can make it easier to get a mortgage, and they can make it easier to pay off student loans.
Income-based repayment plans. Having a high debt-to-income ratio is the No. 1
reason for not being approved for a mort-
gage. Fannie Mae is now changing how it calculates
this ratio for those who have an income-dependent student loan, which is typically renegotiated every
year. Because of this changing payment schedule, Fannie Mae previously used a very conservative 1 per- cent of the total loan instead of the actual monthly payment. From now on, it will use the monthly payment instead, which could easily be several times lower. If you have an income-based loan, you could drastically lower your debt- to-income ratio and increase your chance of qualifying for a mortgage.
Third-party student-debt payments. Some folks are lucky enough to have their student debt paid by their par- ents or even by their employer. The trouble has been that Fannie Mae didn’t take this into account when calculating
the debt-to-income ratio. But now if you can show evidence that your employer or your parents have been paying your student debt for the past 12 months, then this debt won’t be counted in your debt-to-income ratio and you’re more likely to qualify for a mortgage. It’s a great time to get a mortgage, as rates are still at a historic low.
Refinancing a mortgage to pay off student debt. Fannie Mae makes it possible to refinance your mortgage for more than the value of your home. Normally, there is a 0.25 percent fee that applies to any cash that you take out in this way. The third substantial change is that Fannie Mae will now waive that fee when you use this cash to pay off a student loan. This applies whether the loan is yours or you’re a cosigner. It’s important to point out that there are often benefits to education loans that you won’t get with a mortgage, such as deferment or income-driven repayment plans. However, if the mortgage rate is significantly lower than the student loan rate, it can make sense to refinance in this way, and the new
rule makes it cheaper to do so.
These three new rules from Fannie Mae can be a big mon-
ey saver for the right person. If you need help understanding these new guidelines to see whether they’re right for you, or if you have questions about putting them into practice, get in touch with me at 773-250-6492. I’ll be glad to help. d
MIKE COYNE
FOP Finance
Rep t
30 CHICAGO LODGE 7 ■ OCTOBER 2017