Deferred Student Loans

Higher education tuition is extremley expensive and it is almost impossible to get a college degree these days without student loans.   Higher education expenses can surpass $30,000 per year at state colleges and universities and can easily surpass the $50,000 mark at many private colleges and universities.  Many college graduates accumulate more than $100,000 or more in student loans by the time they graduate and often times have their student loans deferred.  Deferred student loans can become a problem for those college graduates who need to qualify for a residential mortgage loan, especially conventional mortgage loan borrowers.   Deferred student loans are calculated in qualifying for conventional mortgage loans.   FHA mortgage lending guidelines have favorable requirements with deferred student loans, unlike conventional mortgage lending guidelines.

Conventional Mortgage Lending Guidelines: Fannie Mae And Freddie Mac

Deferred student loans are included in calculating monthly debt to income ratios with conventional mortgage loans.   Deferred student loans have no monthly payments calculated on the borrower’s credit report so the way Fannie Mae and/or Freddie Mac mortgage lending guidelines want mortgage lenders to qualify is to take 2% of the student loan aggregate balance amount in calculating the monthly payment.  This can be an extreme high amount.  For example, a deferred student loan with a $100,000 mortgage balance will have a $2,000 per month student loan calculation which can automatically disqualify a conventional mortgage loan borrower who makes $40,000 per year.  There is an exception.  If the mortgage loan borrower can get a letter from their student loan provider stating what their monthly student loan payment will be after the deferment period is over, we can use that amount instead of the 2% of the student loan balance amount.

Deferred Student Loans Guidelines For FHA Insured Mortgage Loans

FHA mortgage lending guidelines allows for FHA mortgage lenders not to count the monthly student loan payment in qualifying for the mortgage loan borrower’s debt to income ratios if and only if the mortgage loan borrower can provide proof that the student loan has been deferred by more than 12 months from the closing date.  In the event if the mortgage loan borrower is still in school, they can get a letter from student loan provider that the student loan is still deferred while they are still in school.  If the student loan is deferred less than 12 months, then deferred student loans monthly payments are calculated in the mortgage loan borrower’s monthly debt to income calculations.

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