America’s biggest mortgage lender, Fannie Mae, is making it easier for millennials to buy their first homeJuly 11, 2017
Fannie Mae, the largest US mortgage lender, is making it a little easier for people with all kinds of existing debt — including student loans — to qualify for mortgages. The change will kick in on July 29 when the debt-to-income ratio (DTI), a measure of a borrower’s capacity to make payments, rises to 50% from the current 45% .
To understand what that looks like, let’s say a household earns $5,000 a month and makes monthly debt payments totaling $2,250. Its DTI, debt payments divided by income and expressed as a percentage, is 45%. That’s right at the current ceiling, and a lower DTI would be better.
But when the ceiling is raised, a second household with the same income that spends $2,500 on debt payments would have a DTI of 50% and be just as qualified. The $250 extra spent monthly on paying down debt would be less of a drag on their application.
Student loans are the largest source of debt in the US apart from mortgages. And so, this eased requirement could benefit millennials who are looking to buy their first homes. Amid accusations of overspending on avocado toast and, more plausibly, escalating home prices, the homeownership rate for Americans under 35 — and the rest of the population, in fact — is at the lowest level in several decades.
Source The Real Deal , Full Article: