cancel
Showing results for 
Search instead for 
Did you mean: 

mortgage with $0 IBR

tag
Anonymous
Not applicable

mortgage with $0 IBR

2 years ago I had a VA approval for $70,000 mortgage but I couldn't find a suitable house in that price range. I live on VA Disability pay of about $1072 per month so this is the limiting factor for my approval. Now two years later I do find a house that might fit my budget only to find out that FHA, VA, USDA and everyone else has new rules for how they handle $0 IBR payments. Apparently there is a 1%-2% of the balance monthly against my DTI even if never have to make any payments at all due to my low income. Even if my income doubles I would still not need to pay more then $0 under the IBR/PAYE program. But the lenders who are using the !5 or 2% find a DTI that is between well over 70% in some cases which is not accurate at all.

My motivation for trying to buy a house is that I currently pay $700 per month in rent which accounts for nearly all of my monthly income. I live in one of the cheaper places around here which is a rented mobile home from a mobile home park. I cannot find any place else to rent that has enough bedroom space for my family that I can afford and rent seems to go up each year (due to high demand according to landlord). My plan was to find a small but livable house that I coudl get PITI around $200-300 (roughly half my current living expenses) and begin saving quite a bit of money each month. But it seems I am stuck no longer able to get approved for anything due ot how lenders are handling the $0 IBR on my old student loans.

My credit score is pretty decent, I run about 650 score for the mortgage version of those 19 or so FICO scores I paid for a couple months back and my score will likely be even higher once I pay off my Amex which I used to finance a vacation last year. I have 2 credit cards I pay in full monthly and several other credit lines that sit at $0, one of my credit lines has 20 years of history of being paid on time. I have no late payments of any sort, no collections and only one judgement from when I took my land lord to court for leaving not fixing my broken furnace in 2014. The judgement was for half a months rent to be paid after he affected the repairs to my furnace. The only thing holding me back now is $35,000 in student loans which destroys my DTI ratio with every lenders I speak to and I now have over 20 inquiries in the past 2 years trying different lenders to find out that will work with the $0 IBR.

So what are my options? If there any way outside of a land contract I can manage to cut my living expenses in half? Is there any program conventional or government or something else I should look into?

7 REPLIES 7
Anonymous
Not applicable

Re: mortgage with $0 IBR

If it helps at all, now the lenders are using 1% of your student loan balance as your payment when calculating dti.

 

The other thing you could do is call your loan servicers and ask what is the longest term you can get (25/30 years) and find out what the payment will be. Get that in writing and it should suffice for the underwriter. Hopefully it is much less than the 1% estimate.

 

Im going through the same thing with my student loans.

Message 2 of 8
Anonymous
Not applicable

Re: mortgage with $0 IBR

even at 1% they are taking $350 per month against my $1072 per month of income.  That leaves next to nothing for PITI.  If the student loans coul dbe accepted as $0 payments then I have been approved for $70,000 in the past on a 30 year loan.  With the student loans any approval I might have otherwise have simply evaporates as 40% of my income is around $400 per month and most if not all of that will end up in either 1% or 2% of my student loans.

 

Actually since my income ios tax free I think I can get my income "grossed up" but even so it would around $1200 per month I think...not sure how grossing up works exactly but even with lenders who know to do that my approval is so low it the lender says I wouldnt even have enough to cover the taxes on a typical house.

Message 3 of 8
Anonymous
Not applicable

Re: mortgage with $0 IBR


@Anonymous wrote:

even at 1% they are taking $350 per month against my $1072 per month of income.  That leaves next to nothing for PITI.  If the student loans coul dbe accepted as $0 payments then I have been approved for $70,000 in the past on a 30 year loan.  With the student loans any approval I might have otherwise have simply evaporates as 40% of my income is around $400 per month and most if not all of that will end up in either 1% or 2% of my student loans.

 

Actually since my income ios tax free I think I can get my income "grossed up" but even so it would around $1200 per month I think...not sure how grossing up works exactly but even with lenders who know to do that my approval is so low it the lender says I wouldnt even have enough to cover the taxes on a typical house.


I was under the understanding that it's up to the banks discretion whether they do the 1% now. It goes into effect on June 30. 

Message 4 of 8
Anonymous
Not applicable

Re: mortgage with $0 IBR

The way is was explained tome by FHA themselves is this will be a requirement for any new underwritings if the lender wants to be backed by FHA.  At least for anyone witrh a case number after Sept 2015 or closes after june 2016,  (my dates might not be exact but it was something like that)

If there will be lenders who are able to do FHA and still accept $0 IBR at face value then I need to know how to find one.  I have tried around 20 ledners in the past 12 months (many of which have put credit inquries on my report).  I cannot keep trying to apply everywhere because its beginning to hurt my overall score which is now in the 650 range.  So does anyone know that a certain lender will allow the $0 IBR after June 30th, and if so are they licensed to lend in michigan and can I have their contact information?

Message 5 of 8
Anonymous
Not applicable

Re: mortgage with $0 IBR

I'm going to PM you. 


@Anonymous wrote:

The way is was explained tome by FHA themselves is this will be a requirement for any new underwritings if the lender wants to be backed by FHA.  At least for anyone witrh a case number after Sept 2015 or closes after june 2016,  (my dates might not be exact but it was something like that)

If there will be lenders who are able to do FHA and still accept $0 IBR at face value then I need to know how to find one.  I have tried around 20 ledners in the past 12 months (many of which have put credit inquries on my report).  I cannot keep trying to apply everywhere because its beginning to hurt my overall score which is now in the 650 range.  So does anyone know that a certain lender will allow the $0 IBR after June 30th, and if so are they licensed to lend in michigan and can I have their contact information?


 

Message 6 of 8
Anonymous
Not applicable

Re: mortgage with $0 IBR

There are no lenders who will accept a $0 IBR. Currently, the FHA rule is 2% of the balance if you can't prove the future payment. Starting June 30th, it changes to 1% if you cannot prove the future payment.

Message 7 of 8
Anonymous
Not applicable

Re: mortgage with $0 IBR

This is what I have been finding out.  I just wanted to see if there was something I was missing because paying 70% of my income just for rent is getting way too hard.  2 Years ago I had a $70,000 approval that would give me a payment + taxes of around 30% of my income but I I did not found a house in that price range until now and now that approval is all but worthless due to changes in how they handle $0 IBR.

 

My only chance now is to probably get a land contract on affordable terms.  Only a couple places around here willing to even consider land contract terms but I do have a have a large enough down payment available so maybe I will get lucky.  Thanks.

Message 8 of 8
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.