Student loan debt is one of the top barriers to homeownership today, and Fannie Mae is working to put a stop to it. With a series of new policies, the GSE is looking to help more borrowers with existing student loan debt buy a home, regardless of what their loan balance may be.
According to Jonathan Lawless, Vice President of Customer Solutions at Fannie Mae, the organization is looking to help alleviate one of the biggest issues facing the housing industry in the current market.
“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution,” Lawless said “These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.”
Recognizing the variety of borrowers it serves and “because there is rarely a ‘one size fits all’ approach to this issue,” Fannie Mae’s new policies will offer three payment solutions to borrowers with student debt.
Under these solutions, a borrower can choose to pay down their high-interest student loan debt while refinancing for a lower mortgage rate or exclude their non-mortgage debt—like car loans, credit cards, and student loans that are paid off by a parent or other party—from their debt-to-income ratio on their loan application. The third solution allow lenders to accept student loan payments that are included on applicant credit reports.
“These innovations address challenges and obstacles to homeownership due to a significant increase in student loan debt over the past decade and provide access to credit for qualified borrowers,” a release from Fannie Mae stated.
Approximately 42 percent of millennials are currently living with student debt, with the average debt per person estimated at around $37,000. It’s currently one of the top homeownership hurdles for millennials—and potential buyers of all kinds. Ever-rising rental costs (which make saving for a down payment difficult) is also a major obstacle for many potential homebuyers.