Your mortgage and student loans continued...

THE TYPE OF MORTGAGE MATTERS!!! 


 STUDENT LOANS AND LOAN TYPES:

 FHA
Regardless of the payment status, we must use the greater of these two options:

  • 1% of the outstanding balance OR the monthly payment on the credit report 
OR 
  • The actual document payment (provided it will fully amortize the loan over the term)


Freddie Mac (Conventional): 

  • Loan in Repayment-Use the GREATER of either the monthly payment on the credit report OR  1/2% of the outstanding loan balance
  • Loan in Deferment or Forbearance-Use the GREATER of either the monthly payment on the credit report OR  1% of the outstanding loan balance
  • Loans someone else is paying-Document someone else has been paying the monthly obligation for the last 12 months and then the debt can be omitted from your monthly liabilities



Fannie Mae (Conventional): 

  • IF a payment amount is provided on the credit report, that amount can be used. If the payment is ZERO or not identified on the credit report, then we can use either 1% of the student loan balance OR calculate a payment that will fully amortize the loan based on the repayment terms.
  • Loans someone else is paying-Document someone else has been paying the monthly obligation for the last 12 months and then the debt can be omitted from your monthly liabilities


USDA

  • Fixed payment loans: A permanent amortized, fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed. (essentially, get a copy of your student loan bill!)
  • Non-Fixed payment loans: Payments for deferred loans, Income Based Repayment (IBR), Graduated, Adjustable, and other types of repayment agreements which are not fixed cannot be used in the total debt ratio calculation. 1% of the loan balance reflected on the credit report must be used as the monthly payment. 


VA
Deferred loans-Provide written evidence that the student loan debt will be deferred at least 12 months beyond the date of closing, a monthly payment does not need to be considered.
In repayment or scheduled to begin within 12 months from the date of closing, the VA states we must consider the anticipated monthly obligation! We must use the greater of

  • The payment on the credit report

OR

  • Calculate each loan at a rate of 5 percent of the outstanding balance divided by 12 months (example: $25,000 student loan balance x 5% = $1,250 divided by 12 months = $104.17 per month is the monthly payment for debt ratio purposes).
Loans someone else is paying (that person MUST be a co-signor on the student loan)-Document someone else has been paying the monthly obligation for the last 12 months and then the debt can be omitted from your monthly liabilities

Ready to go crazy yet?
If you made it this far you are either in lending and know most of this already OR you have student loans and are seeking alternate options because someone told you 'no' when you applied for a mortgage.
Either way, give us a shout and we can help!

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