Getting A Mortgage With Student Loans

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This ARTICLE On Getting A Mortgage With Student Loans With High DTI Was PUBLISHED On November 28th, 2019

Getting A Mortgage With Student Loans
Gustan Cho Associates

Getting A Mortgage With Student Loans can often be challenging.

  • Student loans and auto loans are the two biggest barriers affecting mortgage borrowers when qualifying for a mortgage
  • This holds true for professionals such as doctors, dentists, educators, lawyers, and business executives with graduate and/or professional degrees
  • Average college expenses at four-year public colleges and universities can exceed $30,000 annually
  • The price tag for four-year private universities is double, exceeding $70,000 per year
  • Graduate and professional schools can easily cost $100,000 per year
  • Most folks cannot afford going to college and/or graduate school without obtaining student loans
  • Qualifying for a mortgage with student loans is possible
  • Every loan program has different mortgage guidelines when it comes to student loans

In this article, we will cover and discuss Obtaining A Mortgage With Student Loans.

Is It Possible Qualifying For A Mortgage With Student Loans

Is It Possible Getting A Mortgage With Student Loans

Many home buyers with high student loan balances are under the impression that it is not possible to qualify for a Mortgage With Student Loans

  • For example, a recent homebuyer at Gustan Cho Associates was a government worker making $75,000 per year but had over $280,000 in outstanding student loans
  • Our borrower had a job as a government attorney and had student loan balances for both his undergraduate and law degrees
  • The borrower was on an income-based repayment plan (IBR)
  • Never in his wildest dream did he ever think in qualifying for a Mortgage With Student Loans with such a large outstanding balance
  • However, we helped him recently close on his first home with a conventional loan
  • Fannie Mae and Freddie Mac allow IBR payments for mortgage underwriters to use when calculating debt to income ratios

Every loan program has its own mortgage guidelines when it comes to student loans. It is very possible to qualify for A Mortgage With Student Loans even with high balances. In the following paragraphs, we will outline the particular student loan guidelines on the various loan programs at Gustan Cho Associates.

Tricks To Getting A Mortgage With High DTI

What are Tricks To Getting A Mortgage With Student Loans

Millions of consumers have high student loan debt.

  • A large percentage of consumers have their student loan debt in deferment and/or are in an income-based repayment plan
  • With the exception of VA loans, student loans, even in deferment, are taken into account by mortgage underwriters when they calculate the borrower’s debt to income ratios
  • There are various tricks and creative strategies to Getting A Mortgage With Student Loans

There are certain loan programs borrowers may opt to with higher student loan debts.

Consolidating Student Loans

What does Consolidating Student Loans mean

Consumers with various student loan debts higher than $10,000 may be eligible to consolidate all and/or most of their student loan debts at a lower interest rate over an extended term.

  • This will often lower their monthly payments but extend the term of the loan
  • Lenders are primarily concerned with the monthly debt payments and not the overall outstanding loan balance
  • The second-largest monthly debt mortgage borrowers have are car payments
  • Try to avoid buying a new car and/or trading your old car until after you close on your home loan

Lenders will use all of your monthly payments when calculating your debt to income ratios.

FHA And USDA Mortgage Guidelines

What are FHA And USDA Mortgage Guidelines

FHA and USDA have the same mortgage guidelines on student loans.

  • Deferred student loans are no longer exempt
  • This holds true even though the deferment is longer than 12 months
  • With deferred student loans, mortgage underwriters are required to take 1.0% of the outstanding loan balance and use it as a monthly hypothetical debt
  • This holds true even though the borrower is not making any payments now and/or in the foreseeable future
  • The second option is for the borrower to contact the student loan provider and ask for a written hypothetical monthly fully amortized payment over an extended term
  • The extended term is normally 25 years
  • This figure normally turns out to be 0.50% of the student loan balance

Gustan Cho Associates will honor the fully amortized hypothetical monthly payment over an extended-term in lieu of the 1.0% number.

VA Mortgage Guidelines On Student Debt

What are VA Mortgage Guidelines On Student Debt

VA has the most lenient student loan guidelines out of any other loan programs. VA loans are the only loan program that exempts deferred student loans that are in deferment for longer than 12 months.

Here are the VA student loan guidelines:

  • The VA exempts deferred student loans that are in deferment for longer than 12 months
  • For non-deferred student loans, the VA requires mortgage underwriters to take 5.0 percent of the outstanding student loan balance and divide it by 12
  • The resulting figure will be the hypothetical monthly debt used by mortgage underwriters
  • The second option is for the borrower to contact the student loan provider and ask for a written hypothetical monthly fully amortized payment over an extended term

VA loans are the best loan program for owner-occupant primary home loans. However, only eligible active-duty and/or retired members of the U.S. Armed Forces with a valid Certificate of Eligibility (COE) qualify.

Fannie Mae And Freddie Mac Student Loan Guidelines

What are Fannie Mae And Freddie Mac Student Loan Guidelines

Conventional Loans are the best mortgage program for home buyers with high student loan balances.

  • Fannie Mae and Freddie Mac allow IBR Payments to be used on student loans
  • For example, if a medical doctor with a $500,000 outstanding student loan balance has an IBR payment of $200.00 month, that $200 IBR Payment is used by the mortgage underwriter

Conventional loans are the only mortgage program that allows IBR payments.

Qualifying For A Mortgage With High Student Loans With A Direct Lender With No Overlays

How Qualifying For A Mortgage With High Student Loans With A Direct Lender With No Overlays

For more information about this article and/or to qualify for a mortgage loan with a direct lender with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. The Team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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