If you are struggling with student loan debt the prospect of ever qualifying for a mortgage may seem out of reach. However, last week changes made to underwriting rules by Fannie Mae could make easier for borrowers with student loan debt to obtain a mortgage.
The new rule impacts borrowers with federal student loan debt who are currently enrolled in income-driven repayment plans. An income-driven repayment plan sets your monthly student loan payment at an amount that is affordable based on your income and family size. Your monthly payments could be capped at 10% of your income. If your discretionary income is low enough, your monthly payment could be as low as $0.
In order to qualify for the mortgage, a borrower must meet certain debt-to-income (DTI) requirements.
A statement from Fannie Mae says that reduced payment can be used, even when the payment is $0. According to Fannie Mae, “if the lender obtains documentation to evidence the actual monthly payment is $0, the lender may qualify the borrower with the $0 payment as long as the $0 payment is associated with an income-driven repayment plan.”
These new changes will allow more borrowers to qualify for a home, but there are exceptions. These rules do not apply to all mortgages, and are specific to “agency-backed” mortgages that represent more than half of the mortgage market. The changes do not apply to borrowers with private student loans. As a general rule, student loan borrowers should max out federal loans before considering private loans.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.