topic Re: FHA Mortgage + Student Loans w/IBR in Mortgage Loans

FHA Mortgage + Student Loans w/IBR

lamplight2012 — Wed, 12 Oct 2016 20:31:50 GMT

Hello, all.

Me & my fiance are beginning to prep for getting our first home, but I have a question in regards to Student Loans. I've just signed up for IBR. My current payments are $7, $4, & $10; I do plan on working the entire balance of my student loan down to 0, but this will allow me to work the debt snowball(Dave Ramsey style) & focus on each account at a time.

I've read in a couple different places that FHA changed their rules, and they will basically take 1% of the total loan amount & count that towards the DTI. On my credit report, it does list the monthly payments of $7, $4, $10; Will they use the 1 % rule or the monthly payments?

Let me know if you have any advice! I'm debating between FHA or Conventional.

My FICO Score: Across the Board: 670. Once I pay down my CC the utilization should get better & be closer to 700.

Inquiries: Across the Board: 3

Collections: Child Support(2K)

Income: 90K between me & Fiance

Loan Amount: 90-120K

State: KY

Currently, I'm working on paying off back child support. I still currently owe around $2K, but will have it paid down to $0 by EOY. I'll need to pay this off to be eligible for FHA & to help out my son's Mom.

Re: FHA Mortgage + Student Loans w/IBR

ShanetheMortgageMan — Wed, 12 Oct 2016 20:39:12 GMT

All FHA loans are using the new student loan payment guidelines that went into effect a few months ago.

If you are on the IBR payment plan, then 1% of the balance(s) on the student loans will be used to qualify. If you still qualify with those amounts, then you are good. If you don't qualify, then you might want to look into the extended fixed rate payment plan to see how much those payments would be, and then crunch the numbers using it.

FHA can be OK with back owed child support as long as you are on a payment plan with the payments being made on time, but just depends on the underwriter. If you are planning on paying it off by the time you close, then you'll be fine.

FHA allows up to a 56.99% total DTI, although a lot of lenders will cap it anywhere from 50-55%.

Re: FHA Mortgage + Student Loans w/IBR

lamplight2012 — Thu, 13 Oct 2016 14:31:09 GMT

I found this on another thread. Is this not true?

"If you have a payment on your credit report, your lender can use that. If your IBR is at zero payment per month, the lender will use 2% of the balance if a "future payment amount" cannot be determined. Basically, the problem is not with IBR, it is with a "zero payment" amount."

Below is how it's listed on my CR:

Monthly Payment

$10.00

Monthly Payment

$7.00

Monthly Payment

$4.00

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 14:54:33 GMT

That is not correct. It is 1% of the balance unless the repayment fully amortizes the loan such as with a regular repayment or extended repayment. Definitely not 2%.

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 15:14:28 GMT

Fannie Mae - 1%, or fully amortizing payment based on balance remaining on credit report

Total outstanding balance of all student loans	Repayment Period
$1 — $7,499	10 years
$7,500 — $9,999	12 years
$10,000 — $19,999	15 years
$20,000 — $39,999	20 years
$40,000 — $59,999	25 years
$60,000 +	30 years

Freddie Mac - 1%, or IBR payment greater than 0$

FHA - 1%, or listed fully amortizing payment, whichever is greater

USDA - 1%, or listed payment, whichever is greater

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 15:57:50 GMT

Now that is interesting ^^ USDA took my listed payment (credit report and mortgage letter) which is much less than 1% but which will fully amortizes the loan with Extended repayment.

Re: FHA Mortgage + Student Loans w/IBR

ShanetheMortgageMan — Thu, 13 Oct 2016 16:05:46 GMT

@Anonymous wrote:
Now that is interesting ^^ USDA took my listed payment (credit report and mortgage letter) which is much less than 1% but which will fully amortizes the loan with Extended repayment.

If it's a fixed fully amortized payment, then that is correct... USDA will only use the 1% calculation when it's a non-fixed payment plan.

The guidelines say:

Student loans. Lenders must include the payment as follows:

 Fixed payment loans: A permanent amortized, fixed payment may be

used in the debt ratio when the lender retains documentation to verify

the payment is fixed, the interest rate is fixed, and the repayment term

is fixed.

 Non-Fixed payment loans: Payments for deferred loans, Income

Based Repayment (IBR), Graduated, Adjustable, and other types of

repayment agreements which are not fixed cannot be used in the total

debt ratio calculation. One percent of the loan balance reflected on the

credit report must be used as the monthly payment. No additional

documentation is required.

Re: FHA Mortgage + Student Loans w/IBR

ShanetheMortgageMan — Thu, 13 Oct 2016 16:12:19 GMT

@Anonymous wrote:

FHA - 1%, or listed fully amortizing payment, whichever is greater

Not sure where that information comes from, FHA specifically says to use either:

The greater of
- 1% of the outstanding balance on the loan
- The monthly payment reported on the credit report, or
The actual document payment, provided the payment will fully amortize the loan over it's term

It's a little difficult to understand, because that is the way HUD likes to write things... so there are two options to calculate the qualifying payment on a student loan: the greater of the first two (1% or payment listed on the report) or the bottom one (fully amortized payment). It's not the greater out of all three.

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 16:17:37 GMT

who did you use for your USDA loan?

Thanks

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 16:20:22 GMT

I am finding this to be true as well:

Freddie Mac - 1%, or IBR payment greater than 0$

FHA - 1%, or listed fully amortizing payment, whichever is greater

USDA - 1%, or listed payment, whichever is greater

I was just told by a lender yesterday that Freddie Mac would use my IBR payment, which is a TON lower than a 1%

Paul

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 16:22:00 GMT

Consumer Real Estate Finance Co.out of Ft. Lauderdale. It was mostly a good experience with a few hiccups but in the end we closed on our deal. They were excellent with communicating with us overall but our LO was brand new (although he didn't state this I found out on NMLS) and occasionally his communication was not so hot but nothing like the weeks of lack of communication I have heard about and even when we got cold feet he steadied the boat and moved us forward.

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 16:26:37 GMT

Thanks,

I live(rent) in a county that qualifies for USDA but was told that they would have to use 1% and not my IBR payment. Unless, of course, my IBR still kept me within the DTI guidelines.

Re: FHA Mortgage + Student Loans w/IBR

ShanetheMortgageMan — Thu, 13 Oct 2016 16:30:35 GMT

@Anonymous wrote:
Thanks,

I live(rent) in a county that qualifies for USDA but was told that they would have to use 1% and not my IBR payment. Unless, of course, my IBR still kept me within the DTI guidelines.

USDA will never use an IBR payment. If you are on an IBR payment, then USDA will use 1% of the balance to qualify. Freddie Mac will use the IBR payment though, assuming it's >$0.

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 16:35:39 GMT

That is the way I understood it as well.

My IBR is $190/mo so I'm hoping that is the amount that they will be able to use. Freddie Mac that is....

Thanks

Re: FHA Mortgage + Student Loans w/IBR

lamplight2012 — Thu, 13 Oct 2016 17:54:44 GMT

Can someone please explain what this means?

"the repayment fully amortizes the loan"

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 18:04:38 GMT

I believe it means that the payment schedule and amount you are paying will end up paying the loan off within an allotted time (20-30yrs). If your loan is $225k and your IBR payment is $75/mo, you will NEVER pay it off

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 19:56:54 GMT

I will have to go back out and get the links to each, but it's copypasta from Fannie, Freddie, USDA and FHA resources.

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 20:10:39 GMT

Directly from the USDA guaranteed lenders handbook located at :
http://www.rd.usda.gov/files/3555-1chapter11.pdf

Student loans. Lenders must include the payment as follows:
 Fixed payment loans: A permanent amortized, fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed.

 Non-Fixed payment loans: Payments for deferred loans, Income Based Repayment (IBR), Graduated, Adjustable, and other types of repayment agreements which are not fixed cannot be used in the total debt ratio calculation. One percent of the loan balance reflected on the credit report must be used as the monthly payment. No additional documentation is required.

Re: FHA Mortgage + Student Loans w/IBR

ShanetheMortgageMan — Thu, 13 Oct 2016 20:24:02 GMT

@Anonymous wrote:
I will have to go back out and get the links to each, but it's copypasta from Fannie, Freddie, USDA and FHA resources.

I don't mean to argue, but the verbiage you typed in would not come from any lender guidelines... as they are never that simple. When fully analyzed, the explanation can be shortened to make it more clear like you typed (although the FHA & USDA info you typed isn't accurate, for FHA it was never that way and for USDA they updated guidelines from what you typed). If you copied/pasted that info, then it looks like it came from a blog-type resource.

Re: FHA Mortgage + Student Loans w/IBR

Anonymous — Thu, 13 Oct 2016 23:08:45 GMT