Student Loans and Debt To Income

For any one hoping to have a strong pre approval letter, student loan debt can be a real sour pickle.   For the past 12 months our lending guidelines required a monthly payment of 1.0% of the loan balance, as the repayment terms, unless a lower payment is already indicated on the credit report which would fully pay off (amortize) the loan.  In most instances, the payment on the credit report did not fully pay off the loan, therefore we could not use the payment indicated on the credit report.  Fannie Mae as of April, 2017 has loosened the guideline.  The updated policy will make it simpler for lenders to apply the rule, and may actually result in a lower qualifying payment for our borrowers with student loans.  If a payment amount is provided on the credit report, that dollar amount can be used now for qualifying purposes.  When the credit report does not identify a payment amount, or the payment is reflected as zero monthly, we the lender can use either 1.0% of the outstanding loan balance, or a calculated payment that will fully amortize the loan based on the documented loan repayment terms.   This updated guideline brings clarity back to the monthly repayment terms for student loan debt.  Please call me when you are ready to explore one of the most important assets you will ever purchase, 214-551-0809.

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