Mortgage With Deferred Student Loans And High DTI

This BLOG On Mortgage With Deferred Student Loans Was Written By Gustan Cho NMLS 873293

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 where 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.

Guidelines On Mortgage With Deferred Student Loans

Lending Guidelines On Mortgage With Deferred Student Loans is not just a lender overlay but 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 and just take the 1.0% of the student loan balance.
  • These loan officers do not explore other creative options that are available to borrowers with high student loan balances.

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.

  • Even if the borrower has zero student loan payments or are in a Income Based Repayment (IBR), the lender needs to get a monthly amortized student loan payment statement.
  • This needs to be calculated in DTI Calculations.
  • If there is no student loan monthly payment that reports on borrower’s credit reports and the amortized repayment amount cannot be established, then 1.0% of the student loan balance will be used as a monthly debt for DTI Calculations.
  • Maximum debt to income ratio caps requirements with Fannie Mae is 45% 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

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

  • IBR does no longer count and all deferred student loans needs to be accountable for with regards to 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.

How To Get Lower Than 1.0% Of Student Loan Balance Monthly 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 that you are applying for mortgage and need fully amortized monthly payment amount over 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 needs a written hypothetical statement on what the monthly fully amortized payment will be on an extended payment plan.

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 has been deferred for 12 or more months.

Home Buyers having issues qualifying for mortgage with deferred student loans, please contact us at 1-800-900-8569 or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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