Student Loan “Cash-Out Refinance”
The new changes Fannie has put into place will waive the increased fees & higher interest rates associated with “traditional cash out” refinance transactions.
Mortgage Lenders (including Griffin Funding) have changed how student debt is calculated by accepting the student loan re-payment amount listed on the clients credit report. Previously, lenders were required to factor in 1% of the student loan balance monthly payment on the student loan and many borrowers’ debt ratios were pushed beyond most lenders’ underwriting limits.
Students on an “income-based repayment plan” typically have lower payments and now ONLY the monthly repayment amount counts toward the debt-to-income ratio to determine mortgage eligibility.
Currently there are over 5 million borrowers who participate in federal reduced-payment plans student loans but they often couldn’t qualify for home ownership because of the way their debt to income was calculated.
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