Qualifying for a Mortgage With Student Loans

How Will My Colorado Student Loans Affect Getting an FHA, VA, or Conventional Mortgage?

FHA Loans:

As of September 14, 2015, all assigned loans must count deferred loan installments against the Borrower. Here are the complete guidelines from the 4000.1 Handbook.

Qualifying ratios must consider all deferred obligations, regardless of when payments will commence.

For installment debt, the lender must use the actual monthly payment or, if the actual payment is unknown, the terms of the debt or 5% of the outstanding balance.

For a Student Loan, the lender must use the actual monthly payment or, if the actual monthly payment is zero or unavailable, use 2% of the outstanding balance.

Fannie Mae Loans:

Deferred installment debts, such as deferred student loans, must be included in the Borrower’s recurring monthly debt obligations. Suppose the Borrower’s credit report does not indicate the monthly amount payable at the end of the deferment period. In that case, the lender must obtain copies of the Borrower’s payment letters or forbearance agreements so that a monthly payment amount can be determined and used to calculate the Borrower’s monthly obligations.

Exception: For a student loan, instead of obtaining copies of payment letters or forbearance agreements, the lender can calculate a monthly payment using at least 2% of the outstanding balance as the Borrower’s recurring monthly debt obligation. However, if any documentation is provided by the Borrower or obtained by the lender that indicates the actual monthly payment, that figure must be used in qualifying the Borrower.

Freddie Mac Loans:

Effective for Mortgages with Settlement Dates on or after August 1, 2015, the minimum monthly payment amount that must be included in the debt payment-to-income ratio (“DTI”) calculation when a student loan is deferred or is in forbearance, and no monthly payment is verified from 2% to 1% of the outstanding balance of the student loan.

We permit the exclusion of a monthly payment from the DTI calculation when the Borrower is self-employed and the monthly payment is made by the Borrower’s business, subject to certain conditions.

VA Loans:

Projected Obligations: VA loan requirements state that any debt repayment (such as student loans) that is supposed to begin within 12 months must be included in the debt ratio.

For those in Colorado looking to buy a house with student loans tackling concerns ahead of time will save a lot of time and headaches. Buying a home can be complicated. Get pre-approved now to initiate the house-hunting process. With houses hopping so quickly off the market in Colorado, this will also make you a competitive buyer.

We want to help. Remember, a deferred student loan may not negatively change your chances of qualifying. If your debts (plus the mortgage payment) are at most 45% of your income, you are on the right track to successfully becoming a new homeowner. We have no lender overlays at CMG Lending, so qualifying with a Debt to Income ratio above 45% is possible.

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