topic Re: USDA and defaulted student loans, any chance? in Mortgage Loans

USDA and defaulted student loans, any chance?

Candikane — Wed, 10 Jul 2019 22:37:40 GMT

My SO has a mid score of 604, mine is 651, but he has the income. He has 3 TLs of open, defaulted student loans all showing a balance. We're planning to consolidate these (around $21k). Will we have any chance of getting approved for a USDA loan after doing this? Will it help his score to close and zero bal 3 TLs for 1 open, positive (consolidated) loan around 21k? Will it kill his DTI too much for us qualify?

We have a combined income of around $70-75k (he's self-employed and I'm on disability).

I'm wondering if we have any shot at all (we may have found THE ONE) or if it's definitely not happening so I should avoid the hard pull? Thanks!

Re: USDA and defaulted student loans, any chance?

CreditInspired — Thu, 11 Jul 2019 01:31:39 GMT

@Candikane wrote:
My SO has a mid score of 604, mine is 651, but he has the income. He has 3 TLs of open, defaulted student loans all showing a balance. We're planning to consolidate these (around $21k). Will we have any chance of getting approved for a USDA loan after doing this? Will it help his score to close and zero bal 3 TLs for 1 open, positive (consolidated) loan around 21k? Will it kill his DTI too much for us qualify?

We have a combined income of around $70-75k (he's self-employed and I'm on disability).

I'm wondering if we have any shot at all (we may have found THE ONE) or if it's definitely not happening so I should avoid the hard pull? Thanks!

I'm not sure about student loans but someone who does will come along.

Has your SO been self-employed for 2 years and filed income taxes for 2016, 2017 and 2018? What is his net income?

Re: USDA and defaulted student loans, any chance?

Candikane — Thu, 11 Jul 2019 01:44:54 GMT

Yes, and his net is around $55-60k (it fluctuates). The house we wanted sold in a week so we're planning to wait and try later after getting our scores higher, but advice for the best avenue to take with these is definitely still needed. Regardless, they need to be paid on and from what I've read consolidating and paying monthly will stop any adverse reactions like garnishments to come about.

Re: USDA and defaulted student loans, any chance?

JVille — Thu, 11 Jul 2019 01:55:08 GMT

Your SO is in the Cavirs Data Base due to his defaulted student loan. This makes him ineligible for any Federal Backed Loan. He can can do a rehabilitation and get off Cavirs in about 90 days.

This Forum has some real experts regarding these issues. Hopefully someone will come along soon. Is your SO a Veteran?.

Re: USDA and defaulted student loans, any chance?

Candikane — Thu, 11 Jul 2019 12:22:48 GMT

No, he isn't. I've been reading about rehab, too, but we're concerned the monthly payments would be too high if we went that way.

Re: USDA and defaulted student loans, any chance?

CreditInspired — Thu, 11 Jul 2019 12:43:08 GMT

@Candikane wrote:
No, he isn't. I've been reading about rehab, too, but we're concerned the monthly payments would be too high if we went that way.

What does this refer to?

Re: USDA and defaulted student loans, any chance?

JVille — Thu, 11 Jul 2019 13:33:46 GMT

He isn’t in Cavirs ? You said he has defaulted Students Loans, maybe you need to elaborate. Most SL are guaranteed by the Federal Govt. Have you had someone do a Cavirs inquiry for you?

Re: USDA and defaulted student loans, any chance?

pgtackle2003 — Thu, 11 Jul 2019 14:21:44 GMT

If it is a Federal student loan as mentioned by the others, he will almost certainly be in the Cavirs system. I am curious how you know he isn't? I also went through defaulted student loans about 2 years ago. I went through rehab and your concern about payment is warranted. I had to pay over 640/mo during rehab, which honestly at the time I couldn't afford all that well but I didn't have much of a choice. After the 9 month rehab and once my SL was transferred back to a servicers, my payments are about 340/mo. The downside of loan considilation as the old trade lines will not be removed, they will just show a zero balance and closed. In my opinion since the house you wanted has already sold, rehab would be the better path to take. I believe they should use the AGI on the tax return for how much the payment will be during rehab if I remember correctly.

Re: USDA and defaulted student loans, any chance?

homeloanexpert — Thu, 11 Jul 2019 14:27:05 GMT

Hello,

Q: Will we have any chance of getting approved for a USDA loan after doing this?

A: Once the student loans are refinanced, you should be removed from CAIVRS within 3 months. You can get it removed faster with some elbow grease. If you enter into a Rehab Program, most likely it will take at least 9 months before you're eligible to come off CAIVRS and then you have your normal wait. So once the SL's are rectified, you should be eligible, but most lenders will want to see at least 12 months of no late payments. But it just depends on the GUS Findings.

Q: Will it help his score to close and zero bal 3 TLs for 1 open, positive (consolidated) loan around 21k?

A: If the SL's were showing in collection or delinquent, than certainly having them zero would make a improvement in the scores.

Q: Will it kill his DTI too much for us qualify?

A: Don't know not enough information to calculate.

In short, the USDA has tighten up on their ratios to 29/41 for 640 credit score and below. So the payment could put you over the top. With better scores we can push the ratios a little more. (Man I miss the good ole days!) You may want to consider a back loan program. There are DPA's out there with a 620 middle credit score can get you your down payment in the event the RDL doesn't work for you. But any FHA or USDA loan will need to have the CAIVRS claim released.

Best of luck to you!

Re: USDA and defaulted student loans, any chance?

Candikane — Thu, 11 Jul 2019 16:06:37 GMT

Thank you so much for the info! Does rehabbing them give any extra gain than consolidating them? We're concerned the rehabbing monthly payment may be uncomfortably high for us so we're researching more about consolidating them into a single, open, positive account instead. He also needs more positive revolving credit so I think consolidating would also help in that area?

I'm aware that after rehabbing your default is removed, but I've read a lot of people on here say that it was counteracted by "comments" on their report stating that they were previously in default and that the comments weren't being removed no matter how hard they tried.

Re: USDA and defaulted student loans, any chance?

pgtackle2003 — Thu, 11 Jul 2019 16:05:32 GMT

Yes rehabbing gives you a bit more. In rehab they will delete the defaulted trade lines once completed. In consildation the defaulted trade lines remain (with zero balance)

Re: USDA and defaulted student loans, any chance?

Candikane — Thu, 11 Jul 2019 16:43:10 GMT

I was asked if my SO was a veteran. My "no, he isn't" comment was in reply to that.

Re: USDA and defaulted student loans, any chance?

pgtackle2003 — Thu, 11 Jul 2019 16:50:27 GMT

I will explain in a bit more detail for me. I am not sure what the comments means but I assume they just mean dispute comments. So I technically have 7 individual Federal trade lines and one I guess you would say 'master' loan on my CR. When in default I had 8 trade lines all reporting a default. I went through rehab and 7 of the regular trade lines were deleted and the 1 defaulted master loan remained. This is normal and they are very clear about this in the rehab. The original default line remains showing previous 60,90 etc day late payments. Then a new trade line was added (which was dated back to the original loan opening which helped my AAoA) showing good payments from the time the rehab was finished. So no matter which way you look at it, doing rehab is the better long-term option. I would at least call them (they'll ask for last years tax return) and see what the payments would be. If it's truly not afforable then they do have an option where you can provide more paperwork to lower the payments. I am not sure what that process is as I just accepted the payment they stated.

Re: USDA and defaulted student loans, any chance?

JVille — Thu, 11 Jul 2019 17:16:41 GMT

Bottom line if you have defaulted student loans, you are listed in the Cavirs system which makes you ineligible for any Federal Loan (FHA, USDA, any loan Guaranteed by the Fed Govt).
One way or the other your SO must fix the Student Loan issue to get removed from Cavirs.