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Mortgage With Deferred Student Loans And High DTI

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Mortgage With Deferred Student Loans And High DTI

This BLOG On Mortgage With Deferred Student Loans Was UPDATED And PUBLISHED On August 14th, 2019

what are the Mortgage With Deferred Student Loans And High DTI

Qualifying for Mortgage With Deferred Student Loans is a problem with many home buyers.

  • Many home buyers with advanced degrees have student loan balances in the six figures
  • HUD Guidelines On Deferred Student Loans have changed
  • Deferred student loans longer than 12 months are no longer exempt from DTI Calculations
  • IBR and zero student loan payments no longer count
  • FHA requires fully amortized monthly student loan payments over an extended payment term
  • Now, Mortgage With Deferred Student Loans needs to be counted even though the student loan will be forgiven in the future on certain circumstances

In this article, we will cover and discuss Mortgage With Deferred Student Loans And High DTI.

Guidelines On Mortgage With Deferred Student Loans

what are the Guidelines On Mortgage With Deferred Student Loans

Lending Guidelines On Mortgage With Deferred Student Loans is not just a lender overlay. They are mandatory requirements with government and conventional loan programs.

  • Every loan program from FHA, VA, USDA, Fannie Mae, and Freddie Mac set lending guidelines on qualifying for Mortgage With Deferred Student Loans
  • There are certain loopholes with getting Mortgage With Deferred Student Loans
  • There are other options besides taking 1.0% of the student loan balance and using it as a monthly debt
  • Unfortunately, many loan officers are not experienced with guidelines on Mortgage With Deferred Student Loans
  • Often they just take the 1.0% of the student loan balance and use that number as borrowers monthly debt

These loan officers do not explore other creative options that are available to borrowers with high student loan debts.

Conventional Guidelines On Mortgage With Deferred Student Loans

what are the Conventional Guidelines On Mortgage With Deferred Student Loans

Conventional Guidelines On Deferred Student Loans require that all deferred student loan monthly payments need to be taken into account and counted as monthly debt of borrowers.

  • 1.0% of outstanding balance is counted as monthly debt on zero debt
  • Income Based Repayment (IBR) can be used if the IBR payment is reporting on credit bureaus

Being able to use IBR Payments on Conventional Loans in DTI Calculations is a major benefit over government loan programs that do not allow IBR Payments:

  • 1.0% of the student loan balance will be used as a monthly debt for DTI Calculations If there is no student loan monthly payment that reports on borrower’s credit reports
  • The amortized repayment amount cannot be established then the following is used

Maximum debt to income ratio caps requirements with Fannie Mae is 50% DTI to get an approve/eligible per Automated Underwriting System Findings.

  • Maximum debt to income requirements with Freddie Mac is 50% to get an approve/eligible per Automated Underwriting System Findings

Alternative Monthly Student Loans Payments For DTI Calculations

what are the Alternative Monthly Student Loans Payments For DTI Calculations

Most borrowers and loan officers do not realize that there are alternative monthly student loan payments that can be used with qualifying for a mortgage with deferred with student loans instead of the 1.0% of the balance.

  • IBR does no longer count on FHA and USDA Loans
  • All deferred student loans need to be accountable for with regards to the monthly payment

Borrowers who work for the government and qualify for student loan forgiveness programs still need their student loan balances calculated for debt to income calculations.

1.0% Of Student Loan Balance Monthly Payment Versus Amortized Payment

what are the 1.0% Of Student Loan Balance Monthly Payment Versus Amortized Payment

Here is how borrowers can get a lower monthly student loan payment amount for DTI Calculations instead of the 1.0% of the balance:

Contact Student Loan Provider:

  • State you are applying for a mortgage
  • Need fully amortized monthly payment amount over an extended payment plan
  • Normally that amount turns out to be 0.50% of the student loan balance
  • The extended term is normally 25 years
  • Borrowers do not need to change their student loan plans

Borrowers just need a written hypothetical statement on what the monthly fully amortized payment will be on an extended payment plan.

VA Mortgage With Deferred Student Loans

what is the VA Mortgage With Deferred Student Loans

The only mortgage loan program that exempts monthly amortized payments on student loans are VA Loans.

  • VA exempts monthly student loan payments on student loans that have been deferred for 12 or more months
  • Veteran borrowers with large outstanding student loan debt are in luck
  • Here is how The U.S. Department Of Veteran Affairs allows non-deferred student loans to be calculated:
    • Take 5.0% of the outstanding student loan balance
    • Divide that figure by 12 months
    • That figure can be used as a hypothetical monthly student loan debt

Home Buyers having issues qualifying for a mortgage with deferred student loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

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