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FHA, Student Loans, and IBR

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Anonymous
Not applicable

Re: FHA, Student Loans, and IBR

where are you seeing on their website that the IBR disgarge will not be taxable? From what i can tell there is a bill H.R. 2492 which has not been passed yet which is specifically for this? please provide more details.

Message 21 of 39
Jazzzy
Valued Contributor

Re: FHA, Student Loans, and IBR


@MBOhio2 wrote:

goodygoody - The IBR payment is based on your AGI on your tax filing (not disposable income), so it based on your actual income and does not take into account your living expenses, etc. To be more technical, it isn't exactly 15% but is instead 15% minus a deductor, which isn't very much. Here is the exact formula:

 

The IBR monthly payment amount is based on your annual Adjusted Gross Income (AGI) and family

size. Specifically, the maximum annual amount you are required to repay under IBR is 15% of the

difference between your AGI and 150 percent of the U.S. Department of Health and Human Services

(HHS) Poverty Guideline amount for your family size and state. This annual repayment amount is then

divided by 12 to determine your monthly IBR repayment amount.

 

As a result, the amount of my IBR payment is HUGE and is just under 15% of my monthly gross income (you can do the math). Yes, I can technically afford that, but signing up for IBR has basically forced me to pay off a 25-year student loan in 10-15 years by just about doubling the "normal" monthly payment and sucking a huge portion of my disposable income along the way. I wish I would have know this when I signed up for IBR right after graduation because then I would have stayed with a traditional repayment arrangement and not done IBR.

 

I've already spoken with Direct Loans about this and it's simply the downside of IBR. Once you opt in, you cannot get out.


I agree. I called Direct Loans a year ago thinking I wanted on the IBR program. I had just finished grad school, and income at my new job hadn't started yet, and my income during school (for the year before) was down. They cautioned me against doing IBR because I knew my income would be going up drastically. They said that once I was on it I could not get off very easily. I stayed put on my extended payment plan, and I'm glad I did. I'm very glad I happened to run into someone at Direct Loans who gave me the real scoop.

Message 22 of 39
JGWantsAHouse
Regular Contributor

Re: FHA, Student Loans, and IBR

I'm in IBR, I applied for my mortage loan and the LO did not ask what plan I was on. She used what was reported to calculate DTI. So far, so good for me.

Closed on my first home April 2012

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Message 23 of 39
Anonymous
Not applicable

Re: FHA, Student Loans, and IBR

I know the rest of these posts are from last month, but there is a LOT of misinformation regarding IBR on these posts.

 

IBR subtracts 150% of the poverty level for your household size from your AGI to calculate your disposable income. Your payment is then 15% of the difference, OR the minimum payment for a 10yr amortization of the original loan balance, whichever is LESS. (Recent legislation proposes that the 15% be reduced to 10%, effectively lowering the payment, and reduces the time required for forgiveness to 20yrs from 25yrs.)

 

For instance, if one is single, making $45,000/yr, has a student loan payment of $700 over a 10yr term, and lives in an area with a poverty level for single member household of $28,000/yr. This person would pay $250/mo on IBR [ ($48,000 - (150% x $28,000) x 15%) / 12 months = $250; $250 < $700)]. In that same example, the income required by that person to pay the original loan payment of $700/mo would be anything over $98,000/yr. Those who claim their payment is higher due to IBR are mistaken. They will be paying more in total, because the interest continues to accrue, but the monthly payment is not more than the original loans with a 10yr amortization.

 

Once the borrower starts in the IBR program they do not have to re-apply each year. They simply need to supply their tax returns for proof of income.

 

So back to the original question, how does one get a mortgage with a loan in IBR, if the credit report shows a $0 payment? This is not a matter of overextending onself. It is a matter of getting a LO who has a good relationship with the underwriter. If the underwriter understood how the program works, then a borrower with otherwise good credit, decent D:I ratio who is in the IBR program is a good candidate for a mortgage.

Message 24 of 39
Jazzzy
Valued Contributor

Re: FHA, Student Loans, and IBR


@Anonymous wrote:

I know the rest of these posts are from last month, but there is a LOT of misinformation regarding IBR on these posts.

 

IBR subtracts 150% of the poverty level for your household size from your AGI to calculate your disposable income. Your payment is then 15% of the difference, OR the minimum payment for a 10yr amortization of the original loan balance, whichever is LESS. (Recent legislation proposes that the 15% be reduced to 10%, effectively lowering the payment, and reduces the time required for forgiveness to 20yrs from 25yrs.)

 

For instance, if one is single, making $45,000/yr, has a student loan payment of $700 over a 10yr term, and lives in an area with a poverty level for single member household of $28,000/yr. This person would pay $250/mo on IBR [ ($48,000 - (150% x $28,000) x 15%) / 12 months = $250; $250 < $700)]. In that same example, the income required by that person to pay the original loan payment of $700/mo would be anything over $98,000/yr. Those who claim their payment is higher due to IBR are mistaken. They will be paying more in total, because the interest continues to accrue, but the monthly payment is not more than the original loans with a 10yr amortization.

 

Once the borrower starts in the IBR program they do not have to re-apply each year. They simply need to supply their tax returns for proof of income.

 

So back to the original question, how does one get a mortgage with a loan in IBR, if the credit report shows a $0 payment? This is not a matter of overextending onself. It is a matter of getting a LO who has a good relationship with the underwriter. If the underwriter understood how the program works, then a borrower with otherwise good credit, decent D:I ratio who is in the IBR program is a good candidate for a mortgage.


Many of us with significant loan amounts have payments now that are based on an extended payment period of more than 10 years. If that is the case, aren't we at risk of our payments going up higher than they are at present as our incomes rise?

Message 25 of 39
MBOhio2
Established Contributor

Re: FHA, Student Loans, and IBR

TBoneCoug - The information you've provided above is correct, but they way you've explained it does not apply to everyone. Yes, my payment cannot be higher than it would have been on a 10-year repayment plan, but because of the balance of my loans, I was not on a 10-year repayment plan. I was eligible for a 25 year repayment plan... therefore, my current IBR payment is MUCH higher than it would have been had I never signed up for IBR (and than it was during the first few months of my repayment after graduation). This is a common issue with IBR and I am not the only high-income person on IBR that is now kicking themselves for signing up for it.... even when I talk to Direct Loans, they acknowledge that this is the downside of IBR.

 

Jazzzy - YES, that is a risk!! After consolidation, my original loan term with Direct Loans was 25 years (it's a large balance).... then I ignorantly signed up for IBR when I was super underpayed in my first job after graduation. Now that I have a significantly higher income, my current IBR payment is MUCH higher than it ever would have been under the original 25 year repayment terms. Basically, my original loan of 25 years has been condisensed to somewhere between a 10-year and 15-year repayment and the monthly payment is about double what it would have been. If you think your income will increase significatly over time, do NOT sign up for IBR!!

 

Note: None of the above impacts one's mortgage application, it's just an FYI for those considering IBR.

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Message 26 of 39
Student_Loans_Kill
Frequent Contributor

Re: FHA, Student Loans, and IBR

Whats better for Mortgage with income increase in near futire

 

IBR or ICR


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Message 27 of 39
MBOhio2
Established Contributor

Re: FHA, Student Loans, and IBR

Neither one is "better"..... all that will matter for your mortgage is the current monthly payment amount. Of course, a lower payment will help your DTI for mortgage purposes, but you should really decide which payment plan works best for you long-term and then just allow your DTI for mortgage purposes fall into place on its own.

Mid-2010 Starting Scores: FAKO EQ 476 FAKO EX 506 FICO TU98 575
July 2017 Current Scores: Approx 710 (waiting for official updates)
Message 28 of 39
Anonymous
Not applicable

Re: FHA, Student Loans, and IBR


@Anonymous wrote:

 

So back to the original question, how does one get a mortgage with a loan in IBR, if the credit report shows a $0 payment? This is not a matter of overextending onself. It is a matter of getting a LO who has a good relationship with the underwriter. If the underwriter understood how the program works, then a borrower with otherwise good credit, decent D:I ratio who is in the IBR program is a good candidate for a mortgage.


Same question. My girlfriend is on IBR, and currently owes $0/month bc of income.  However, the LO is saying that they must assume 2% of her loan balance ($95k) per FHA guidlines.  SallieMae has not provided any documentation that she currently owes $0/month.  Is there anything anyone has been able to tell/give to their LO to prove of a similar situation?  As a side note, we will be getting the mortgage together, with me shouldering more of the monthly payment.

Message 29 of 39
bbb3601
Frequent Contributor

Re: FHA, Student Loans, and IBR

Can't you print out a loan summary at direct loans. It has my IBR payment listed......plus they mailed me a leter?

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Message 30 of 39
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