DTI and student loans?

Anonymous · ‎04-28-2017

I am entering the planning stage to buy a home in the next few years but have some confusion about how student loans factor into the debt-to-income ratio. I've read some posts that indicate lenders consider the higher of: 1) 1% of the remaining loan balance, 2) monthly payments on the loan. Is this true?

My situation currently is that I am on a graduated repayment plan and the monthly payments I am making are about half of what 1% of my loan balance would be. So, I currently have about $60k of student loan debt, but I'm only paying about $300/month currently.

When I apply for a home loan, would lenders consider my monthly debt due to student loans to be the $300/month, or would they consider $600/month? I'm hoping for the former, because the latter kind of throws my DTI off balance...

Anonymous · ‎04-28-2017

VALoanMaster just made a post about this. Fannie Mae now has new guidelines that if there's a monthly payment amount that is used on the credit report, that will be used when factoring DTI. For other loans, it's 1% of the reported balance.

I have $60K in student loans, so I'm looking at $600/mo going towards our DTI. I think the other option is having a payment that will amortize the loan.

Calidreaming · ‎05-04-2017

Don't worry you can use the payment that fully amortizes the loan. I am closing on a house end of this month and I had the same issues with my $115K in student loans. You may want to find a loan officer that fully understands the rules, because many of them do not and this is a make or break issue if you have a large amount of student loans. .

SSH0126 · ‎05-04-2017

Can you PM you rloan officer info?

VALoanMaster · ‎05-05-2017

@Calidreaming wrote:
Don't worry you can use the payment that fully amortizes the loan. I am closing on a house end of this month and I had the same issues with my $115K in student loans. You may want to find a loan officer that fully understands the rules, because many of them do not and this is a make or break issue if you have a large amount of student loans. .

Hi Cali,

That's the point of the Fannie Mae update, whether or not the payment fully amortizes is irrelevant. Fannie will take whatever the payment is on the credit report or statement from the servicer which is the same way VA & Freddie Mac treat student loans.

VA Mortgage Expert. Mortgage Banker lending in All 50 States.
VA, FHA, USDA. Jumbo, Conventional.
CAIVRS Expert.

Calidreaming · ‎05-05-2017

Just pm'ed you SSH0126!

Calidreaming · ‎05-05-2017

Oh wow there's been another update on this. My life would have been so much easier a couple of weeks ago had I known. Where can I find the thread?

Anonymous · ‎05-05-2017

@Calidreaming wrote:
Oh wow there's been another update on this. My life would have been so much easier a couple of weeks ago had I known. Where can I find the thread?

http://ficoforums.myfico.com/t5/Mortgage-Loans/Fannie-Mae-Updates-Student-Loans/m-p/4931109

Calidreaming · ‎05-05-2017

Thanks for the link rookie! It's kind of a bittersweet change for me. I had to back out of a conventional loan a couple of weeks ago due to the old rule and go FHA. If only this had been in place a month earlier, would have saved me a LOT of trouble. It's incredible how quickly these things change.

On the bright side though, I guess I can refi very quickly and get out of the FHA pmi. My home appraised very high and so I will have nearly 15% instant equity. I'm also expecting my mortgage scores will go way up in the next few months. Any reason I can't refinance within a year or so?

Anonymous · ‎05-05-2017

We are in the process of getting a new construction home. We are currently looking at the FHA route, but I'm hoping after making the changes to my credit as advised by my lender, we can go conventional the route to avoid the extra charges from FHA. Although surprisingly, us going conventional route will increase our mortgage payments by $50. We will most likely take the FHA now and refinance within 5 years.