Drop the Burden of Student Loan Debt
Getting an education is one way to help you land a satisfying career, but the problem with getting that education is the associated student debt. And there can be a lot of it. So much so that your amount of debt can prevent you from doing other things – fun things – such as saving for retirement, going on vacation, and buying your first home, that you would love to do.
Even assuming that you find a great job in your field, chances are you will start at the bottom of the income ladder. Combine that with your debt repayment with basic living expenses, such as groceries, rent, and transportation, and that debt can seem absolutely crippling. Will it ever end?
In a nutshell: yes, it can end. Enter Fannie Mae.
Fannie Mae: Also known as the Federal National Mortgage Association, Fannie Mae is a government group that sponsors financial products and services with the goal of helping lower and mid-income people afford to buy a home.
After listening to the repeated cry of struggling Americans, Fannie Mae has taken a look at how they deal with people with student loans, and how that debt has really put the brakes on home affordability. What they come up with is a way to help those people deal with their student debt. More manageable debt means a greater chance of realizing the dream of home ownership.
Below is what they have done.
Fannie Mae has tweaked how payment obligations are calculated in debt ratios used in determining whether hard-working Americans can get a mortgage. Not only do these changes make the calculations easier, it could result in a needing a lower qualifying payment, or in some cases, no payment at all – even if you do have student debt! And best of all – these changes are available right now.
Here are the changes:
1. If your student loan payment amount is on your credit report, then that amount can be used in calculations without needing to determine if that payment amortizes your student loan
2. If you don’t have a student payment amount on your credit report, or if the amount is listed at a whopping $0, then your mortgage lender can either:
– Calculate your outstanding student debt at 1%, OR
– Apply a calculation that will amortize your loan completely based on documented repayment terms
3. Better yet, if someone else is repaying you student loan debt for at least 12 months in a row, then it can be left out of your debt ratio. You need to show adequate proof of this.
But that’s not all – you have even more options. For example, if you have a mortgage and student loan debt, you could refinance your home, and use your existing home equity to pay off student loan debt. This is particularly great if your student debt is in a more manageable range, and if the interest rate on your student debt is quite high. Why pay more interest if you don’t have to?
Also, this cash-out refinancing could have the added benefit of lowering your existing mortgage payments. Now that’s worth a smile or two! Note that the loan – level price adjustment that usually applies to cash-out refinancing will be waived when you have met all of the necessary requirements.
The Shamrock School of Saving
Paying off your student loan debt faster can make the next phase of your life – home ownership – seem not just possible, but within reach. And Shamrock Financial is here to help. We can take a look at your finances, suggest overall ways to improve them, and then determine precisely how you can benefit from these updates from Fannie Mae. Just think – possibly no more student debt plus having access to home ownership! This is going to be good!