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Fannie Mae has not completely eliminated the 1% rule.
If your student loans are in deferment, or if your IBR payment is $0.00, you still have to use a calculation that will fully pay off the loan at the end of an amortized term, or 1% of the balance of the loan.
If you do not have a fully amortized payment, and if your debt to income ratio is too high using 1% of the balance of the loan, Fannie Mae offers the following calculation table that may reduce your payment.
The following table specifies the repayment period to be used when calculating a fully amortizing payment at the current prevailing rate
This is great news, it aligns Fannie Mae's guidelines to Freddie Mac's. If a payment >$0 is listed on your credit report, then that payment can be used no matter what type of payment plan it represents.
https://www.fanniemae.com/content/guide/selling/b3/6/05.html#Student.20Loans is the link to the published guideline.
This is perfect timing for me !
So, just for clarification on this, I'll use my student loan scenario.
I currently have $66K in student loan debt(consolidated loans). I'm on an Income-Based Repayment plan that is $155.89 per month. All of my documentation has the final date of payment in 2027, which is 10 years from now. I am currently NOT participating in a public service loan forgiveness program either.
So, when the lender finalizes our loan in July, according to these new rules, they will use the $155.89 toward the DTI and not the 1%?
@Anonymous wrote:So, just for clarification on this, I'll use my student loan scenario.
I currently have $66K in student loan debt(consolidated loans). I'm on an Income-Based Repayment plan that is $155.89 per month. All of my documentation has the final date of payment in 2027, which is 10 years from now. I am currently NOT participating in a public service loan forgiveness program either.
So, when the lender finalizes our loan in July, according to these new rules, they will use the $155.89 toward the DTI and not the 1%?
If you are applying for a Fannie Mae, Freddie Mac or VA loan then $155.89/mo will be used, as long as that is the amount that reports to the bureaus.
@VALoanMaster wrote:Fannie Mae has not completely eliminated the 1% rule.
If your student loans are in deferment, or if your IBR payment is $0.00, you still have to use a calculation that will fully pay off the loan at the end of an amortized term, or 1% of the balance of the loan.
If you do not have a fully amortized payment, and if your debt to income ratio is too high using 1% of the balance of the loan, Fannie Mae offers the following calculation table that may reduce your payment.
The following table specifies the repayment period to be used when calculating a fully amortizing payment at the current prevailing rate
To add to this... You can do a "refi rate/term" if you're paying off student loans instead of a "cash-out refinance" which can result in a lower interest rate!
The new Selling Guide also allows us to exclude debts that are paid by someone other than the borrower as long as we have a 12-month history. This holds true even if the person paying the debt is not obligated on the loan of said debt.
Can this thread be made a sticky??