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The yourFirst Mortage program offers conventional loans, they are not FHA as far as I know. Conventional loans are usually Fannie/Freddy compliant, which means that 1% of the loan amount will be used IF, and only if, you a. have no payment amount listed on your credit report, or b. your payment amount could not possibly pay your student loans over the life of the loan.
For example, if you have 40,000 in student loans at a 212 month term, $188 plus interest would fully amortize the loan amount. If your IBR is $50, that would NOT amortize the loan, so the 1% figure would be used instead.
I have heard of consumers contacting their loan company and having their terms extended with a payment that will amortize the loan at a lower amount, and then switching it back to IBR after purchasing their homes.
Freddie Mac only requires 1% to be used if the student loan is in deferment or forberance and you can't provide a monthly payment. Otherwise, they can use the payment listed on your credit report even if it's IBR as long as the payment isn't $0. FHA, USDA, and Fannie Mae will require a fully amortizing payment or 1%.
@Anonymous wrote:The yourFirst Mortage program offers conventional loans, they are not FHA as far as I know. Conventional loans are usually Fannie/Freddy compliant, which means that 1% of the loan amount will be used IF, and only if, you a. have no payment amount listed on your credit report, or b. your payment amount could not possibly pay your student loans over the life of the loan.
For example, if you have 40,000 in student loans at a 212 month term, $188 plus interest would fully amortize the loan amount. If your IBR is $50, that would NOT amortize the loan, so the 1% figure would be used instead.
I have heard of consumers contacting their loan company and having their terms extended with a payment that will amortize the loan at a lower amount, and then switching it back to IBR after purchasing their homes.
I am definitely going to see if switching my payment plan from IBR and back is an option. That would solve a lot of problems for us if so. It's a hassle but one we'd only have to do once since the first mortgage is the most difficult.
Also, would the payment plan need to be switched before applying for the loan or can it be switched right before a contract is placed on the home?