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Government Inconsistency With Student Debt Calculations is Preventing Homeownership. That Needs to Change.

Wednesday, February 5, 2020

The Urban Institute (UI) says the five government mortgage lenders and their various ways of accounting for income-driven repayment (IDR) plans are inhibiting the ability of many potential homebuyers to buy a home. IDR plans are used by many student loan programs and require special handling in mortgage underwriting. The problem with an IDR arises in the calculation of the debt-to-income (DTI) ratio, the percentage of a borrower's income that is committed to debt service including payment on student loans. While there has recently been a little easing of what had been fairly rigid caps on DTI, higher ratios still limit a borrower's ability to get a mortgage or increase the cost of the loan.

 

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