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Any loans that don't use 1% of student loans for DTI?

Any loans that don't use 1% of student loans for DTI?

I am aware that FHA and USDA use 1% of your total student loan balance calculated as a monthly payment for DTI when on IBR. Just wondering if there are any mortgages out there that have low down payments and would calculate my actual IBR monthly payment of $60 versus 1% ($460). I was specifically interested in MyFirst Mortgage from Wells Fargo but I believe I read somewhere that, that's a form of FHA loan??
Message 1 of 8
7 REPLIES
Frequent Contributor

Re: Any loans that don't use 1% of student loans for DTI?

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.

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Message 2 of 8
Valued Member

Re: Any loans that don't use 1% of student loans for DTI?

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%.

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Message 3 of 8
Regular Contributor

Re: Any loans that don't use 1% of student loans for DTI?


ProfGoGetter 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.

Message 4 of 8
Regular Contributor

Re: Any loans that don't use 1% of student loans for DTI?

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?

Message 5 of 8

Re: Any loans that don't use 1% of student loans for DTI?

Thank you both for your guidance.. Can you give me any info on Freddie Mac as far as minimum credit requirements/score? Or give me a link where I can read about it? I've googled with no helpful results
Message 6 of 8
Valued Contributor

Re: Any loans that don't use 1% of student loans for DTI?

Conventional loans w Freddie and Fannie require higher scores, min 680 and that's not guaranteed nor a good rate, 720 at least is best, I would see if my DTI could support pulling SL out of IBR into a standard repayment plan and go FHA/USDA if you have somewhat lower 640 ish scores
Message 7 of 8
Established Contributor

Re: Any loans that don't use 1% of student loans for DTI?

USDA wants 660 or significantly more documentation. Also has lower debt to income limits 29/41 and you cannot be able to qualify for any other loan In order to qualify USDA guaranteed. Add income limits and location limits.

Extended standard would help with DTI.
Message 8 of 8