Student Loans Guidelines On Purchase And Refinance Mortgages
This Article Is About Student Loans Guidelines On Purchase And Refinance Mortgages
Student Loans Guidelines On Purchase And Refinance Mortgages differ depending on the individual loan program. Student Loan Debt is one of the major hurdles and barriers for home buyers. This holds especially true for professionals with advanced degrees like doctors, dentists, lawyers, and educators. USDA Student Loans Guidelines are exactly those of FHA. VA Loans have its own Student Loans Guidelines. Fannie Mae and Freddie Mac Student Loans Guidelines allow IBR Payments On Student Loans.
HUD Student Loans Guidelines On FHA Loans
HUD, the parent of FHA, does not allow Income-Based Repayment plans, commonly referred to as IBR, on FHA Loans. As mentioned earlier, USDA has the exact same student loan guidelines as FHA Loans. So the student loan guidelines below on FHA Home Loans apply to USDA Loans as well. Student Loans Guidelines On FHA Loans are the following: HUD does not allow IBR Payments .HUD does not accept deferred student loans on FHA Loans: This holds true even though borrower’s student loans are deferred for longer than 12 months.
Fixed Student Loan Payments:
Consumers with a permanently fixed student loan payment that has been fully amortized can be used as a monthly debt for DTI Calculations:
Lenders need to have proper documentation to verify that monthly payments are fixed and amortized. Both interest rates and the repayment term of the outstanding student loan need to be fixed.
Deferred And NON-FIXED Student Loan Payments
HUD does not allow non-fixed student loan payments. Below are examples of non-fixed student loan payments:
- Deferred student loans
- Income-Based Repayment
- Graduated student loans
- Adjustable student loans
- Other types of repayment agreements that are not fixed
- All the above non-fixed student loan payments cannot be used on USDA and FHA Loans
One percent of the loan balance reflected on the credit report must be used as the hypothetical monthly payment: No additional documentation is required if the above 1.0% is used as the borrower’s hypothetical monthly payment.
There are tricks of the trade we can discuss over the phone. We do have alternative hypothetical monthly payments other than the 1.0% rule. Please contact us at Gustan Cho Associates at Loan Cabin Inc. At 262-716-8151 or text us for a faster response. Or email us at [email protected]
VA Student Loans Guidelines
VA Home Loans are the only loan program that permits deferred student loans that have been deferred longer than 12 months exempt from DTI Calculations. Per VA Student Loans Guidelines, the mortgage can exclude deferred student loans which are deferred longer than 12 months from the DTI of borrowers.
VA does not allow Income-Based Repayment Plans.
Here is how non-deferred student loans are calculated on VA Loans:
- Take 5% of the outstanding student loan balance that is reporting on the consumer credit report
- Divide by 12
- The resulting figure will be the hypothetical monthly payment on VA Home Loans
If the payment amount reporting on the consumer credit report is less than the threshold payment above, the borrower needs to do the following:
- Obtain a statement by the student loan provider
- The statement needs to state the loan terms and payment for each student loan
- The statement needs to be dated within 60 days of the closing of VA Home Loan
- Lenders may do a credit supplement on this
IBR Payments On Student Loans Are Allowed On Conventional Loans
Fannie Mae permits Income-Based Repayment on Conventional Loans. It can also be a zero IBR Payment and Fannie Mae will allow it. If there is a monthly payment reflected on the consumer credit report, then that payment can be used as the actual monthly payment. If the IBR payment is not reporting on the consumer credit report, then the borrower needs to get an IBR statement from the student loan provider. The lender may do a credit supplement of the IBR Payment so it reflects on the borrower’s credit report. If the consumer credit report doesn’t provide a monthly figure or reflect zero, the lender needs to confirm the IBR Payment as follows:
If a mortgage borrower is on an IBR Plan, the borrower needs to provide a written statement by the student loan provider stating the borrower has a zero IBR Payment. Mortgage Underwriters can qualify borrowers with zero IBR Payments with Fannie Mae. Freddie Mac does not allow zero IBR Payments.
1% of the outstanding student loan balance is used for deferred outstanding student loans OR.
The borrower can contact the student loan provider and get a fully amortized monthly payment on an extended term. This needs to be in writing.
Gustan Cho Associates are experts in working and qualifying borrowers with high outstanding student loans and high debt to income ratios. Please contact us with any questions at 262-716-8151 or text us for a faster response. Or email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays.