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Hi all,
I was pre-approved for an FHA mortgage last year but decided to hold off for a couple months on purchasing due to some expenses that came up. I tried to start the process again this past week to get another pre-approval, but was now told that I won't qualify for the amount I'd like because FHA has changed the rules on income based student loan payments as of the start of 2014. My credit score is good (around 750) and I have a decent income, but my student loans are relatively high.
The loan officer said that FHA now requires them to use the highest possible payment I would make on my student loans (the standard 10 year repayment) which puts my DTI too high for the mortgage I'd like. I know the DTI rules changed this month, but I haven't seen anything else that mentions how they perceive IBR student loans. I also realize that people have had trouble with them in the past with certain banks, but she made it sound like it was an across-the-board FHA change. I contacted another mortage officer who was recommended to me, but he didn't seem to know anything about it. So, I'm not sure if this is true to all FHA loans or just those through this particular bank. I can change my student loan plan back to the extended payment plan or try again with another bank, but before I go through the hassle, does anyone know if this is true for the IBRs and all FHA loans?
Thanks!
FHA has made no changes to calculating student loans on IBR plans. They don't have any requirements that pertain specifically to IBR student loans. The only issue using the payment listed on the credit report is when it's $0, then additional documentation is needed to confirm what the payment will be when the payment begins (otherwise underwriting will commonly use 2% of the balance as the monthly payment).
I have read/heard of loan officers advising their clients that FHA underwriting will use the maximum payment but that is not FHA's guideline, that is their own institution's lending guideline (they are playing it conservatively).
USDA has a guideline that on IBR student loans a minimum of $100 (or the actual payment) must be used, that is the only published guideline from FHA/VA/USDA/Fannie/Freddie specifically on IBR student loans.
@ShanetheMortgageMan wrote:FHA has made no changes to calculating student loans on IBR plans. They don't have any requirements that pertain specifically to IBR student loans. The only issue using the payment listed on the credit report is when it's $0, then additional documentation is needed to confirm what the payment will be when the payment begins (otherwise underwriting will commonly use 2% of the balance as the monthly payment).
I have read/heard of loan officers advising their clients that FHA underwriting will use the maximum payment but that is not FHA's guideline, that is their own institution's lending guideline (they are playing it conservatively).
USDA has a guideline that on IBR student loans a minimum of $100 (or the actual payment) must be used, that is the only published guideline from FHA/VA/USDA/Fannie/Freddie specifically on IBR student loans.
So if my current payment is $30/month..... then USDA would use $100. Not really a dealbreaker, just curious.
How does the USDA handle it if the IBR payment is $0. Still use $100??
The full verbiage from USDA is:
IBR payments of $0 are not eligible to be used in the debt ratio. The applicant must provide documentation of the IBR payment plan from the loan servicer. The following apply:
1. If the IBR payment is less than $100 and 1 percent of the total loan balance is more than $100, a minimum payment of $100 must be included in the debt ratios.
2. If the IBR payment is less than $100, and 1 percent of the total loan balance is less than $100, a minimum payment of 1% of the loan balance must be included in the debt ratios.
3. If the current IBR payment is over $100, use that payment amount in the debt ratios.
Shane,
Thank you for your help in clarifying this!
Amy