Income-Based Repayment Student Loan Mortgage Guidelines

This Article Is About Income-Based Repayment Student Loan Mortgage Guidelines

Large outstanding student loans is a major hurdle for Americans.

  • This holds especially true for homebuyers who need to qualify for a home mortgage
  • Government and conventional loans have their own individual agency mortgage guidelines when it comes to student loans
  • Deferred student loans that has been deferred for longer than 12 months are no longer exempt from debt to income ratio calculations with the exception of VA loans
  • VA loans is the only home mortgage program that exempt deferred student loans that have been deferred for longer than 12 months
  • Income-based payments, often referred to as IBR payments, can be used on conventional loans only

Home buyers with large outstanding student loans on IBR payments need to qualify with conventional loans.

Income-Based Repayment Student Loan Mortgage Guidelines On Loan Programs

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 GuidelinesIncome-Based Repayment

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. Even zero balance IBR payments can be used on conventional loans.

Income-Based Repayment Student Loan Mortgage Guidelines: 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 LoansWhat are 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

Fannie Mae and Freddie Mac Income-Based Repayment Student Loan Mortgage Guidelines allow IBR payments on conventional loans. Other loan programs do not allow IBR payments.

Qualifying For A Mortgage With A Lender With No Lender Overlays And Who Are Experts On Non-QM Loans

Borrowers who need to qualify for home loans with high student loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans. Not only are we known for not having any lender overlays on FHA, VA, USDA, and Conventional loans, Gustan Cho Associates has a national reputation for being a one-stop mortgage company for having over dozens of non-QM and alternative mortgage loan programs. Gustan Cho Associates have dozens of non-QM wholesale lending partners. Some of our popular non-QM mortgage loan programs include bank statement mortgages, asset-depletion loans, fix and flip loans for real estate investors, non-QM mortgages one day out of bankruptcy and foreclosure, and many other unique and alternative loan programs for owner-occupant homes, second homes, and investment properties. The support and licensed personnel at GCA Mortgage Group is available 7 days a week, evenings, weekends, and holidays. Again, contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected]

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