topic Re: Student Loan/Public-Sector Job/Mortgage in Student Loans

Student Loan/Public-Sector Job/Mortgage

Anonymous — Sun, 07 Mar 2010 12:25:55 GMT

I've just spent the past hour or so reading over the many posts on here and they've been very informative. However, I still have a quick question that I was hoping someone could help me out with.

Between my undergraduate and graduate studies, I've amassed for myself a nice chunk of student loans (~$100K). This isn't necessarily THAT horrible assuming that all my schooling will eventually result in much higher income potential. However, for the time being, I'm seriously contemplating doing some public-sector work after I graduate this May. So far, majority of the jobs that I've looked at/interviewed for have a salary in the range of about $40K. My current plans are to start off on the income based repayment option (monthly payment should be around $300) and then pay larger amounts as my income increases.

Anyway, my question is - hypothetically speaking - if my salary doesn't increase significantly within the next several years, will I never be eligible for a mortgage due to the high debt-to-income ratio? I'm trying to decide if I should either forget about trying to save some money for a potential down payment on a house and use whatever money I have left over each month toward the student loan or just stay current on my monthly payments while I put away a bit toward the down payment. If I calculate the amount of money I've spent on rent during my time in school, it just blows my mind away. If I can, I'd like to avoid throwing my money away by paying rent to a complete stranger and instead, use that money toward building some equity for myself.

Not sure if this info is relevant or not, but besides the student loan, I have no other debt.

Thanks in advance for any helpful insight on the matter.

Re: Student Loan/Public-Sector Job/Mortgage

SCF — Mon, 08 Mar 2010 00:41:52 GMT

Hey Pibb,

Are these federally-backed student loans? If so, you should get yourself on the Income-Based Repayment (IBR) plan. The first benefit is that it will adjust your payment based on your income, and show how much you are expected to pay each month on your credit report, which should help you explain to your mortgage lender why this loan won't be a burden that will prevent you from paying for a home. The second benefit is that under this plan, if your loans are already though, or are consolidated with Direct Loans, you may be eligible to have the remaining balance on your loans forgiven after 10 years spent working full-time in the public sector. Google "Public Service Loan Forgiveness" and you'll find good information to determine if it applies to your situation. I definitely think it's worth looking into though, since it was designed with people like you in mind.

Hope that helps!

Re: Student Loan/Public-Sector Job/Mortgage

Anonymous — Tue, 09 Mar 2010 01:08:07 GMT

Thanks for the reply.

Yes, they are federally-backed student loans and I have every intention of signing up for the IBR plan. I guess my question is when mortgage lenders calculate the debt-to-income ratio, do they just consider the monthly payments or the debt as a total.

Assuming that I go ahead and take the public-sector job, my monthly income will be ~$3300/month (~$40K/year). If they only consider the monthly payments, then my debt-to-income ratio is very manageable (~$300 student loan under IBR plan / ~$3300 = ~10%). However, if they consider the debt as a total, then that's a completely different story.

I've read/heard stories supporting each side... so which is right?

Thanks.

Re: Student Loan/Public-Sector Job/Mortgage

Anonymous — Thu, 11 Mar 2010 01:10:44 GMT

I am in contract on a home with about $70K of students loans (thought it was less but I forgot about my Perkins). I am also on IBR now hoping in 10 years my loan will be forgiven. I think you have to ask a lender if they will accept the IBR payment instead of standard. My lender did not ask me about my payment so I assuming that she went by standard.

Now I did go look at new homes and talked a new home rep (who is not a lender per se) but she asked me for my financial info. I told her I had no debt other than student loans--she asked what I paid and I said $250 a month (this was when I was on graduated payment plan) and she then asked me would the payment stay the same for 2 years and I said yes. I don't know if because it is a builder trying to sell their homes if they are more willing to work around credit issues.

Re: Student Loan/Public-Sector Job/Mortgage

mazinaige — Mon, 15 Nov 2010 23:06:51 GMT

There will be a Public Service Loan Forgiveness Webinar on Nov 17 & Dec 8 where you could ask this question. For details follow this link: http://ficoforums.myfico.com/t5/Student-Loans/Public-Service-Loan-Forgiveness-Webinar-Nov-17-amp-Dec-8/td-p/779569

Re: Student Loan/Public-Sector Job/Mortgage

MarineVietVet — Tue, 16 Nov 2010 00:34:46 GMT

@mazinaige wrote:
There will be a Public Service Loan Forgiveness Webinar on Nov 17 & Dec 8 where you could ask this question. For details follow this link: http://ficoforums.myfico.com/t5/Student-Loans/Public-Service-Loan-Forgiveness-Webinar-Nov-17-amp-Dec-8/td-p/779569

Thank you for contributing to the forums but you've posted this information in two other places. Cross posting is highly discouraged.

-marinevietvet, myFICO moderator

Re: Student Loan/Public-Sector Job/Mortgage

Anonymous — Tue, 16 Nov 2010 13:48:58 GMT

in my experience with the USAA mortgage dept, they will use your monthly income VS. your monthly debt obligations to calculate DTI.

your total amount of debt is not considered, only your monthly payment to service the debt.

my wife, who has better credit than i (for now anyway, i'm catching up), was pre-approved for a mortgage based on that criteria.

Re: Student Loan/Public-Sector Job/Mortgage

mazinaige — Thu, 25 Nov 2010 19:15:29 GMT

That's hopeful news! Thanks MDfive21.