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Student Loan Debt Solution Found

Posted by Jane Peters on December 14, 2018
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Gene Mundt, a Chicago mortgage originator discusses a welcome new addition to the Fannie Mae revised guidelines regarding student loan debt. Be sure to also read his previous post on those guidelines.
Mounting Student Loan debt has become a huge concern …

This is true not only for individuals carrying student loan, but for GSE’s (Government Sponsored Enterprises) like Fannie Mae that oversees and ensure mortgage liquidity and guidelines to Banks, Lenders, and Mortgage Providers.

In a previous post, I noted that Fannie Mae had revised guidelines as they pertain to treatment of Student Loan Debt when applying for loan.  Those changes were favorable for Home Buyers carrying student loan debt, as they allowed Mortgage Underwriters some flexibility in examiningand allocating for student loans.

Student loan debt solutionThis new more relaxed view removed some financing obstacles and made it easier for Mortgage Lenders to reach mortgage approval for Borrowers.  It opened the door for more potential Borrowers with Student Loan Debt to qualify for a Mortgage and buy homes.  A very welcomed outcome.

Now, adding to that earlier positive change, another new financing option offers hope to those that hold student loans. It comes in the form of financing called the “Student Loan Cash-Out Refinance Option”.  The refinance option is backed by Fannie Mae and other wholesale lenders.

A cash-out refinance option has long been an option available for homeowners with home equity.  Those homeowners could use the refinance to pay off debts of any kind.

But with this new refinance option, when paying off Student Loan debt, certain costs normally charged to a borrower are “forgiven” or “eliminated”.

In turn, these savings result in either a:

  • Lower interest rate offering

or …

  • Additional “cash out” at Closing 

It truly can be a real benefit to Borrowers to finance in this manner.

As with any new program, there will be a learning curve felt by lenders, but for current homeowners with sufficient equity looking to reduce or eliminate higher interest rate Student Loans and higher Student Loan payments … there can be profound relief found via a “Student Loan Cash-Out Refinance”.

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