Hello I just went through this last week. My husband and I were all set to close on our home when we found out after pulling credit again right before that his student loan had gone on his credit report and was in default. If you are in a loan rehab plan and your CAIVAR number is clear than you should be fine. His credit has since gone up 61 points to a 646 after dropping 100 points because of this. We only needed a 620 to get approved for the FHA loan. We have a letter saying that he has made his last 4 payments on time from the dept of education and we are bringing it to the loan meeting tomorrow. They just want to see that the orignal date of default was not in the last year to two years. Not the date that the newst company that bought the debt. I added him to my credit card as an authorized user and that's what brought his score up so quickly. Depending on when the credit card company reports is how fast your score will go up. I added him on the 8th of november and the company reports on the 14th. The score was showing on the 16th. Thank GOD! To be an authorized user you do not have to get your credit checked.
Here is our situation. We are in the middle of underwriting for a new construction home with USDA Guaranteed. We recently found out one of my husband's student loans came out deferrment and he did not know it. They reported late 3 times and has caused his score to drop 100 points! Our LO has asked him to pay for a rapid rescore with the defferment status letter. She says the CB should rescore and remove the lates. She tells me that UW will not look past this because his DTI is high. I have contacted ACS they refuse to do anything about the reporting even though they have backdated the defferrment to cover it. Please help me understand, I an going nuts!
Just keep in mind that the quoted sections are the min for FHA - the lender may have, and most do, more stringent requirements and thus their UW guideline may be auto denial for recent student loan CO's regardless if rehabbed or not. If it is their policy then you would have to search for another lender that has no such UW guidelines - a broker may be of more assistance here.