Mortgage Help for Debt-Saddled Grads
New rules make it easier to qualify for a home loan or to use a refi to pay off college debt.
![](https://cdn.mos.cms.futurecdn.net/mF6fgYWfnHe7fxHy83Ze33-415-80.jpg)
Today’s college grads leave school with an average of $34,000 in student-loan debt. That mound of debt is delaying homeownership among millennials. Parents and grandparents who cosigned private student loans or took out Parent PLUS loans may also be burdened. Now, mortgage giant Fannie Mae has launched loan-underwriting changes that will lighten the load.
When calculating a borrower’s monthly debt-to-income ratio, lenders will exclude payments made in the past year by someone else—typically a parent or employer—for nonmortgage debt, including student loans. And for those on an income-adjusted repayment plan, lenders will use the lower payment on a federally insured loan instead of the higher, fully amortized payment of principal and interest.
A third initiative allows homeowners to refinance their mortgage, taking cash out to disburse directly to a student-loan lender to pay off debt. That will also help parents or grandparents who borrowed to help the kids and now want to refinance. The new Student Loan Cash-Out Refinance loan can’t exceed 80% of the current market value of the home. For example, refinancing a $175,000 mortgage, lowering the rate from 4% to 3.75% and rolling in $25,000 in student loans would save borrowers about $80 a month.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Refinancers will lose some student-loan protections, including income-based repayment and deferment on federal loans. You’ll lose any student-loan interest deductions for which you may have been eligible, but you’ll gain a larger mortgage-interest deduction if you itemize on your tax return.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
403(b) Contribution Limits for 2024
retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
By Jackie Stewart Published
-
Roth IRA Contribution Limits for 2024
Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
By Jackie Stewart Last updated
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
-
Five Ways to a Cheap Last-Minute Vacation
Travel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
By Vaishali Varu Last updated
-
How to Figure Out How Much Life Insurance You Need
insurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life insurance needs.
By Kimberly Lankford Last updated
-
When Is Amazon Prime Day?
Amazon Prime Amazon Prime Day 2024 runs Tuesday July 16 and Wednesday July 17, marking the 10th Prime Day event.
By Bob Niedt Last updated
-
How to Shop for Life Insurance in 3 Easy Steps
insurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
By Kaitlin Pitsker Published
-
Five Ways to Shop for a Low Mortgage Rate
Becoming a Homeowner Rates are high this year, but you can still find an affordable loan with these tips.
By Daniel Bortz Last updated