Let’s look deep into one of the great mysteries of getting a mortgage.

When ever people talk about The Bank and applying for a mortgage one of the HUGE concerns for both the homeowner and The Bank are Student Loans.

In the past not-too-many years Student Loans have become a national disgrace because college costs have sky-rocketed and more and more students have received Student Loans.  It is not uncommon for an individual to rack up $100,000 in student loans and in some professions that number can go much higher.  Like every loan all of the Student Loans have monthly payments that are due.  In today’s America almost half of every Millennial will have student loans and they are a big deal.  In today’s photograph we see an old one room school, oh how things have changed!

And her comes the second part of a two-punch whammy; an individual’s Debt To Income Ratio. (DTI)  Very recently Fannie Mae guidelines were that an individuals DTI ratio could not exceed 45%.  That has been increased to 50%.  This means………………:

  • Let’s pretend that an individual’s income is $6,000 per month.  Under the old rules their DTI ratio would be 45%.  So, if our mysterious individual had monthly debt that came to $1,200 it would be equal to 20% of their income, or DTI.  The remaining 25% of the monthly income could go to a mortgage. 
  • Under the new rules for the same mysterious individual the remaining 30% could go to a mortgage as the DTI rules have changed.

Evidently the Fannie Mae rules were adjusted to help First Home Buyers that are saddled with Student Debt.

As if this isn’t confusing enough don’t forget that not every bank subscribes to the Fannie May and Freddie Mac rules.  Some, not many, banks do what are called “In-House-Mortgages.”  These are loans that are made by a local bank and not sold to investors on the open market.

So, here is our advice again….., it does pay to shop around and find out as much as you can.

So, whether you went to The University of Vermont here in Chittenden County’s Burlington or Middlebury College in Addison County your Student Loans are important, but their impact can vary from bank to bank.

What do you think?  Other than paying off your loans how can we help?

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