Can Mortgage Lenders Help Borrowers With Student Loans Buy Homes?
With home prices climbing in areas across the country, it is becoming harder for millennials and prospecting buyers with student loans to purchase a home. Though, this does not have to be the case.
According to Jonathan Lawless, Vice President of customer solutions in Fannie Mae's Single-Family Business, mortgage lenders can actually help those with student loans that are looking to purchase a home.
"A bachelor's degree is still a good investment, even when financing that education requires student loans," said Lawless in a National Mortgage News op-ed.
"However, for those who started but did not complete their bachelor’s degree, the negative effect of student loans on homeownership is particularly acute. Additionally, having student loans may delay homeownership but does not seem to affect renters' long-term homeownership aspirations."
Lawless suggest home equity can be a go-to way to get students into a home. He also shares some insight on a Student Debt Cash-Out Refinance option that Fannie Mae introduced in 2016.
"There is $8.4 trillion in home equity in the U.S. That's a resource that homeowners can leverage to pay off student loan debt — either their own or debt they've co-signed," according to Lawless.
"Fannie Mae introduced a Student Debt Cash-Out Refinance in 2016, which allows homeowners with 20% equity to refinance their mortgage and use the proceeds to pay down or pay off a student loan."
The report also states that when underwriting the loan for students, their monthly student debt payments should be calculated. Lawless compares it to the way student debt payments are calculated based on their income.
As millennials begin to look to their future, it is important to know that owning a home does not have to be an unattainable goal. To learn about more ways mortgage lenders can help those with student loan debt purchase a home, click on the image above.
