Student Loan Debt Mortgage Guidelines For Home Loans
In this blog, we will cover student loan debt mortgage guidelines to qualify for government and conventional loans. We will go over the guidelines on Fannie Mae, Freddie Mac, HUD, VA, and USDA with regard to qualifying for mortgage loans with outstanding student loan debts.
Fannie Mae Student Loan Debt Mortgage Guidelines
First, let’s go over Fannie Mae and Freddie Mac’s guidelines on conventional loans. If your credit report has a payment on the credit report Fannie and Freddie Conventional loans will use that payment. If there is a $0 or Unknown amount reporting on the credit report, mortgage underwriters will then hit borrowers for 0.50% percent of the balance for a monthly payment on conventional loans. Example of a case scenario:
- if you have $10,000 outstanding on the student loan balance
- then mortgage underwriters will add $50 or 0.50% as borrowers’ hypothetical debt when calculating the debt-to-income ratio on conventional loans
Student Loan Debt Mortgage Guidelines on Income-Based Repayment
But if you make a phone call to your Federal student loan company and ask for an Income-Based Repayment Plan or IBR plan they will give a low payment that Conventional underwriters will use. For example, if you have $10,000 and you call in and say I need an IBR plan, the student loan provider may give an IBR payment of $10 a month. This is a lot better than $100. This works for deferred payments too.
Getting Hypothetical Monthly Payment on an Extended Payment Plan
If you take your deferred payment plan and turn it into an IBR then you will have to start paying right away on your plan. But what most people don’t know is why you should call Non-QM Mortgage Lenders Consumers can always call back and put their loans back into deferment. The student loan companies are very nice on the phone and they want to help you in every way possible.
HUD Student Loan Debt Mortgage Guidelines
HUD student loan debt mortgage guidelines are similar to Conventional student mortgage loan debt guidelines. USDA has the exact student loan debt mortgage guidelines as FHA. Deferred student loans longer than 12 months no longer are exempt from FHA and USDA loans.
If you have large deferred student loans, then the lender will take 0.50% of the outstanding student loan balance as a hypothetical monthly payment. It will be used for your debt-to-income ratio calculations. It is the same if you have $0 dollars reporting on your credit report or outstanding student loans are in deferment, the Underwriter will hit you for 0.50% payment unless there is a number such as one dollar.
HUD Student Loan Debt Mortgage Guidelines on IBR Payments
You cannot have a zero IBR payment. 0.50% of the outstanding student loan balance is a hypothetical debt used by mortgage underwriters to calculate borrowers’ DTI. But if you call the student loan company and request not an IBR but an Extended Payment Plan. Needs to be fully amortized over an extended term which is normally 25 years. This can reduce the monthly obligation that the underwriter will use.
VA Student Loan Debt Mortgage Guidelines
VA Loans allow deferred student loans that have been deferred longer than 12 months. This is how mortgage underwriters need to calculate hypothetical student loan debt on VA Home Loans. Student Loans deferred longer than 12 months are exempt from DTI. If non-deferred, underwriters must do the following. Take 5% of the outstanding student loan balance. Take that and divide it by 12. The resulting figure will be monthly hypothetical monthly student loan debt used for DTI
How Do Fully Amortized Monthly Pays Over Extended Term Work
How this works is most student loans are amortized over 10 years. If you ask for an Extended plan they will amortize your payment over 25 years. So you call them up and ask for a 25-year payment plan and they will give you a payment. If that payment covers your total debt when multiplied by years then the underwriter will use this payment.
You may need to go back and forth with the student loan company to get this right. For example, if you have $50,000 in student loan debt, the underwriter will use $500 a month if you do nothing. If you call and ask for a 25-year Extended payment plan and they give you $100 per month for 25 years this will not work. This is because $100 times 300 months (25 years) equals $30,000. This is short of the $50,000 you owe.
Getting Lowest Amortized Monthly Payment From Student Loan Provider
You need to renegotiate with them and get your payment up to a minimum of $166 a month. This will cover your $50,000. The underwriter will use $166 vs the $500 if you do nothing. Again student loan companies are very helpful. You can call back later in the year and go back to deferred. In summary, you need to contact us at Non-QM Mortgage Lenders
We will increase your purchasing power by helping you renegotiate your student loan debt with either IBR for conventional or an Extended Payment Plan for FHA. If you have a high student loan balance and need a lender with no lender overlays on government and conventional loans, please contact us at Non-QM Mortgage Lenders at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Non-QM Mortgage Broker is available 7 days a week, evenings, weekends, and holidays.
