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Fannie Mae Updates Student Loans!

Established Contributor

Fannie Mae Updates Student Loans!

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

National Mortgage Banker.
VA Mortgage Expert.
Message 1 of 9
8 REPLIES
Super Contributor

Re: Fannie Mae Updates Student Loans!

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.

Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime) since 2002, based in Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

Message 2 of 9
New Member

Re: Fannie Mae Updates Student Loans!

This is perfect timing for me !

Message 3 of 9
Frequent Contributor

Re: Fannie Mae Updates Student Loans!

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%? 

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Message 4 of 9
New Member

Re: Fannie Mae Updates Student Loans!

This is great news! I was hoping this would happen but I thought FHA would be the next one. How soon do we think FHA follows suit?

Guess I need to start preparing to go the Fannie route also. We were already looking at Freddie after we were denied under FHA using the 1% student loan balance
Message 5 of 9
Super Contributor

Re: Fannie Mae Updates Student Loans!


rookie08 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.

Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime) since 2002, based in Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

Message 6 of 9
Frequent Contributor

Re: Fannie Mae Updates Student Loans!


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!

Mortgage Loan Officer in Greater Chicago are plus 47 states.
Message 7 of 9
Valued Contributor

Re: Fannie Mae Updates Student Loans!

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.

Mortgage Loan Officer in Northern California - lending in The Golden State from the Oregon border down to San Diego!


Message 8 of 9
Regular Contributor

Re: Fannie Mae Updates Student Loans!

Can this thread be made a sticky??

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