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Income-Based Repayment Student Loan Mortgage Guidelines

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Income-Based Repayment Student Loan Mortgage Guidelines

This BLOG On Income-Based Repayment Student Loan Mortgage Guidelines Was PUBLISHED On May 2nd, 2019

Income-Based Repayment is often referred to as IBR Payments.

  • Income-Based Repayment is only allowed with conventional loans
  • FHA, VA, USDA does not allow Income-Based Repayment
  • Fannie Mae and Freddie Mac set conventional guidelines
  • Many borrowers with advanced degrees have high balance student loans
  • Professionals such as medical doctors, dentists, chiropractors, podiatrists, pharmacists, lawyers, and educators often have student loan balances exceeding $100,000 plus
  • Many doctors and dentists have student loans exceeding $500,000
  • HUD, the parent of FHA, requires 1% of the outstanding loan balance to be used as borrower’s hypothetical debt unless borrowers have full amortizing monthly payments
  • VA Loans is the only mortgage program that exempts deferred student loans deferred longer than 12 months

We will cover Income-Based Repayment and student loan guidelines on other loan programs on this blog.

Fannie Mae-Freddie Mac Student Loan Guidelines

Fannie Mae and Freddie Mac Guidelines on student loans allow IBR Payments.

  • Conventional Loans are the only mortgage program that allows Income-Based Repayment
  • The IBR Payment needs to report on all three credit bureaus
  • IBR Payments that do not report on credit reports, lenders can collect documentation by borrowers and do a rapid-rescore
  • Rapid-rescores expedite correct information to be reported on all three credit bureaus
  • Many borrowers with very high student loan balances may need to go with conventional loans
  • The loan balance does not matter

Borrowers can have a $20 dollar per month IBR payment on a $300,000 outstanding student loan balance. 

Income-Based Repayment
Gustan Cho Associates

FHA And USDA Student Loan Mortgage Guidelines

FHA And USDA have the exact student loan mortgage guidelines.

Here are FHA And USDA Mortgage Guidelines On Student Loans:

  • Need a fully monthly amortized monthly payment over an extended term in writing by the student loan provider
  • If the borrower cannot obtain a fully amortized monthly payment by the student loan provider, then lenders need to use 1.0 percent of the outstanding student loan balance as a monthly hypothetical debt
  • Deferred student loans deferred longer than 12 months are no longer allowed on FHA and USDA Loans

Borrowers with very high balance student loans may need to opt for conventional loans.

VA Mortgage Guidelines On Student Loans

VA is the only loan program that exempts deferred student loans deferred longer than 12 months from debt to income ratios. All deferred student loans that have been deferred longer than 12 months are exempt from DTI calculations of borrowers.

Otherwise, here is how VA Guidelines on student loans works:

  • Take 5% of the outstanding student loan balance
  • Divide that figure by 12 months
  • The yielding number is the hypothetical monthly payment used by mortgage underwriters

Borrowers who need to qualify for home loans with high student loans, please contact us at Gustan Cho Associates. We are direct lenders with no overlays on government and conventional loans. We are available 7 days a week, evenings, weekends, and holidays. We are available at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

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