IBR guidelines/Mortgage

[ShanetheMortgageMan]

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@VALoanMaster wrote:

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@Anonymous wrote:

Yea, it doesn't fully amortize my payments at all.

The 1% doesn't really kill my deal- but I have to be able to find a house for like 180K vs the 220K I was really looking for. Surprisingly though, when I searched with my new criteria- I found a lot of homes I liked. So hey.. Maybe it isn't worth the headache to change anything.

Last I checked I was at a mortgage middle score of about 670. Wonder should I try and raise it to go the conventional route?

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Hi Jadepassion19,

Fannie Mae has a special program that you maybe eligible for that could make it a lot easier to hit your 220K price point.

The program only requires 3% down & the private mortgage insurance is a little less than FHA.

Feel free to PM me for more info.

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This loan program is called Fannie Mae HomeReady and the details can be found at http://www.fanniemae.com/home-ready (including a fact sheet, FAQ, and a product matrix).  The major limitation is income, as some areas require that the total income be within a certain level... but there are a lot of areas that do not have income limits.  It's a regular Fannie Mae program with some enhancements.

[ShanetheMortgageMan]

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@Anonymous wrote:

I would also mention that income based or graduated plans will not be accepted by FHA. The loan has to be a fixed payment or extended fixed payment plan that fully amortizes. To get the lowest payment, choose the extended fixed payment option if available (30 years instead of 25). This will likely be much less than the 1% per month (at least if you're like me with lots of student loan debt).

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Pretty certain the extended payment plans are a 25-year term.  https://studentaid.ed.gov/sa/repay-loans/understand/plans

[Anonymous]

Yes, 25 years was the longest fixed term they offer.

I didn't have to actually switch over- what I did was- get them to send a letter stating what it WOULD be

if i DID switch over. So while $495 (on an extended 25 year plan) is more expensive than the $285 IBR plan

I am on, it's a hell of a lot better than $800 being calculated into my DTI.

[ShanetheMortgageMan]

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@Anonymous wrote:

Yes, 25 years was the longest fixed term they offer.

I didn't have to actually switch over- what I did was- get them to send a letter stating what it WOULD be

if i DID switch over. So while $495 (on an extended 25 year plan) is more expensive than the $285 IBR plan

I am on, it's a hell of a lot better than $800 being calculated into my DTI.

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Underwriting accepted the letter without you switching over to the extended repayment plan?  Did you close?  Hope so, because that underwriter isn't reading the guidelines correctly.  FHA guidelines require that the mortgage lender must use either:

• the greater of:
  • 1 percent of the outstanding balance on the loan; or
  • the monthly payment reported on the Borrower’s credit report; or
• the actual documented payment, provided the payment will fully amortize the loan over its term.

So, if your actual payment is $285/mo, and it's IBR, then the underwriter needs to revert back to using the greater of 1% of the outstanding balance or the monthly payment on the credit report. 

If you've already closed, then no big deal, the lender will just have to deal with FHA's insurance later on (if you ever default or if FHA ever audits the file).  If you haven't closed, then just be prepared to convert it to the actual extended repayment plan prior to closing, in case the underwriter catches their own error or if it goes through a quality control audit before closing.  As has been pointed out, you can always switch the payment plan after closing.

[Anonymous]

Somehow, I am just noticing your reply. 

I did not close yet. Closing is set for 6/5. File is in underwriting right now. (3 days now)

No one has mentioned anything yet, but you know how THAT goes- I am sure I'll hear about this.

I am prepared to change it over, no big deal, but I sure hope this doesn't hang anything up- bc the 

closing time lines are already very SHORT. I signed the contract on 5/5. 

SIGH- now I'm MORE worried than before! LOL. This process is not for the faint of heart. 

Even with the fully amortized payments my DTI is @ 45% which is already pushing it! 

I can't take this agony LOL.