FHA Guidelines Deferred Student Loans For Borrowers

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FHA Guidelines Deferred Student Loans For Borrowers

This BLOG On FHA Guidelines Deferred Student Loans For Borrowers Was UPDATED On March 26th, 2018

Two largest debt payments on borrowers are auto loans and student loans.

  • FHA Guidelines Deferred Student Loans no longer allows Income Based Repayment nor Deferred Student Loans that is deferred for more than 12 months
  • FHA Guidelines Deferred Student Loans requires underwriters to calculate 1.0% of the student loan balance or a fully amortized monthly payment over an extended term
  • Most extended terms are 25 years
  • The fully amortized monthly payment on an extended term (normally 25 years) needs to be a written statement by the student loan provider
  • The fully amortized monthly payment over an extended term normally comes out to be 0.50%

The fully amortized monthly payment over an extended term does not have to be executed. Borrowers just needs a hypothetical statement by the student loan provider.

How Deferred Student Loans Can Disqualify Borrowers On FHA Loans

Student loan payments are calculated by mortgage underwriters as part of the home loan borrower’s monthly debt to income ratios.

  • Deferred student loans can no longer be waived in debt to income calculations for FHA loans
  • This is the case even though borrower has the student loans deferred for at least 12 months
  • IBR no longer can be used
  • Those with advanced degrees such as medical or law degrees can have as much as $100,000 or more in student loans
  • Monthly payments may be extremely high where the monthly student loan payments may not qualify borrowers
  • This is many times the case where a newly graduated doctor or attorney just lands an entry level job with a promising career
  • Potential salary boost by the time the deferment period is over and the consumer can start paying on their student loan payments
  • In situations like these where the borrowers has deferred student loans and just started a new job but wants to purchase a home, FHA Guidelines Deferred Student Loans has strict new rules

FHA Guidelines Deferred Student Loans And Loophole On How To Qualify

Per new FHA Guidelines Deferred Student Loans, FHA no longer exempts deferred student loans from borrower’s debt to income ratio calculations on student loans that has been deferred for more than 12 months.

  • Those who are employed but are also going to school consistently can normally get an extension on their student loans and get them deferred
  • Many times borrowers will have their student loan deferment expire in a few months
  • As long as they are in school, the can request a deferment extension and would normally get it
  • Unfortunately, FHA Guidelines Deferred Student Loans stated on HUD 4000.1 FHA Handbook, deferred student loans are no longer exempt from DTI Calculations
  • Home Buyers who have large student loan balances need to contact their student loan provider and do the following:
    • Tell them ” I am applying for mortgage
    • My lender needs a fully amortized monthly payment extended term 
    • Normally the maximum term student loan providers can extend to is 25 years
    • This figure, which is normally 0.50%, can be used in lieu of the 1.0% of the student loan balance

VA Guidelines On Deferred Student Loans

Unlike FHA loans, VA Home Loans  does have an exemption with deferred student loans. Deferred Student Loans that has been deferred for more than 12 months are exempt from debt to income calculations for veteran borrowers under VA Guidelines On Deferred Student Loans.

  • If deferred student loans has not been deferred for more than 12 months, then a fully amortized monthly payment over an extended term will be used
  • For example, if the mortgage loan borrower has a $100,000 outstanding balance on a student loan and the student loan provider cannot provide a minimum monthly payment invoice, underwriters will use 1.0% of the $100,000, or $1,000 as the monthly student loan payment in calculating the borrower’s debt to income ratios

NON-QM Loans are portfolio loans with no waiting period after housing event and no mortgage loan caps. NON-QM Loans do not count deferred student loans longer than 12 months.

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www.gustancho.com

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