in default, need advice pls.....

[Anonymous]

I am currently 4 months into rehabilitation on my defaulted student loan. I am trying to get a condo before the deadline for the federal tax credit. By March I should be able to have my credit score in the 640 to 650 range. FHA to my knowledge doesn't give any mortgages while in rehab of student loans, and I won't be out of rehab until August this year and I would definitely qualify credit wise then, but that will be after the tax credit ends. I was just wondering what my options are, is the only way to get the loan out of default by paying it off in full? currently about 5k. There is no possibility of a fha loan while in rehab? Also, with a credit score of 640, would a conventional mortgage be possible if these loans are in default on my credit? How much down? Thanks in advance for any answers....

[Anonymous]

Hi-  I hate to break this to you but here's the deal.  Rehab is great, if you can find a lender. 

I work for a state guarantee agency that does process rehabs, the problem we have is that there are very few lenders right now repurchasing rehabbed loans, and the ones who are have very limited funds.  If a lender is not available to you after you complete your 9 months of consecutive, voluntary on-time monthly payments to qualify you will still need to make payments until a lender is found for your loans.

Unfortunately no one knows when there will be funds available or how much will be available when the money does show up. 

Given your timeline I would ask to see if a consolidation is an option for you.  We report a consolidation as paid defaults on your loans and then as a new loan.