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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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