Qualifying with 90k in student loans

[Anonymous]

The loan officer i have been talking to said that she can get me a conventional loan but the total amount wouldn't be as high because of my scores (which I am working drastically on).  I am sitting around 700 right now I think and she said I need to try to get around 720 or higher to get Fannie Mae/Freddie Mac so that they can use my IBR payment amount rather than the 1% FHA has to use.   She said Fannie and Freddie are pretty strict on scores.  Then conventional I can get, but she cannot push my DTI as high. 

[Kree]

That sounds silly,  if you have a IBR plan, then the only reason a payment would go up is if your income goes up too.

Silly mortgage loan officer, maybe ask to talk to someone else?

[Anonymous]

You can't afford it. Think about it. How the heck would you be able to make payments on both loans on only $45k?

Not only will you have the mortgage, you'll have around $400/month in taxes and insurance.

You probably bring home about $2200 a month or less. Let's go over the numbers.

Mortgage payment $825
Taxes and insurance $425
Electric Bill: $175
Water/sewer: $75

You are looking at $1500 a month right there. You are broke. You can't afford the house. You can barely afford your student loans.



You are drowning in debt. Rent a cheap place.

[VALoanMaster]

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wrote:

My guess is that you're considering an FHA loan because they are more forgiving regarding lower credit scores. Unfortunately, FHA is not going to allow you to use an IBR even if the payment amount is established. I just went over this with my own loan officer who recently took a course on this very topic. They are most likely going to use 1% of your total amount owed which will definitely destroy your DTI.

If your credit is currently at 600 and you've got 8 months before you're going to be looking to apply for a mortgage then your best plan of attack is raising your score and finding a loan other than FHA. Look into the USDA Guaranteed. If you can get your score up to a solid 660 then you should start finding some reasonable loan options. Anything backed by Fannie Mae or Freddie Mac (I believe) will use an IBR as long as your credit report is reflecting that it is in repayment for that amount. 

Good luck! 

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Hi Eve,

You need a new lender.

Here is what FHA says:

(1) Definition Student Loan refers to liabilities incurred for educational purposes.

(2) Standard The Mortgagee must include all Student Loans in the Borrower’s liabilities, regardless of the payment type or status of payments.

(3) Required Documentation If the payment used for the monthly obligation is:

 less than 1 percent of the outstanding balance reported on the Borrower’s credit report, and

 less than the monthly payment reported on the Borrower’s credit report; the Mortgagee must obtain written documentation of the actual monthly payment, the payment status, and evidence of the outstanding balance and terms from the creditor.

(4) Calculation of Monthly Obligation Regardless of the payment status, the Mortgagee must use either:

 the greater of: o 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

[VALoanMaster]

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wrote:

The loan officer i have been talking to said that she can get me a conventional loan but the total amount wouldn't be as high because of my scores (which I am working drastically on).  I am sitting around 700 right now I think and she said I need to try to get around 720 or higher to get Fannie Mae/Freddie Mac so that they can use my IBR payment amount rather than the 1% FHA has to use.   She said Fannie and Freddie are pretty strict on scores.  Then conventional I can get, but she cannot push my DTI as high. 

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You do not need a 720 score for a conventional loan. In fact most lenders will go down to 620 on them. 

While conventional loans are more restrictive when it comes to the maximum debt ratios there are ways to "offset" that.

For example: There are 2 different programs, one through Fannie Mae & the other through Freddie Mac, that has lower PMI & rate hits while also allowing us to use the lower student loan payment. The down side to these 2 programs is they have income limits depending on where you're buying.

[Anonymous]

Hi,

What is going on with this thread? 

First of all, ATV7 or whatever - that was an unnecessarily impolite response to the OP. Rental rates vary by state and city. For example, my mortgage payment (including tax, insurance, and HOA fee) is $1,448 for a single family home. The town I live in has limited rental options, but the rent for a 2 bedroom apartment in one of the few apartment buildings is $1595. Renting is not always cheaper than buying and renting is not always an option.

VALoanMaster - I'm not sure if you directed your comment to me because you thought I was the OP or if you are referencing my post about my e-mail to my lender. In either case, I certainly do not need a new lender. I'm not getting an FHA loan so nothing that you quoted is relevant to my loan situation. My loan is backed by Fannie Mae and Fannie Mae allows the underwriter to use the current monthly payment amount towards the DTI as long as that amount can be verified.

[Anonymous]

The letter was Navient my student loan provider. I have a FHA mortgage. Mine is yearly too.

[Anonymous]

Numbers don't lie. OP cannot afford it. $45k is not enough income. OP would have $700 a month left, maximum, to pay the student loan, eat, and otherwise live off of. Don't forget maintaining the house. That costs money too.

[VALoanMaster]

Hi Evewasframed,

I replied to your comment & highlighted the specific part by changing the font color to red.

I specifically replied that you needed a new lender because you stated:

 Unfortunately, FHA is not going to allow you to use an IBR even if the payment amount is established.

I just went over this with my own loan officer who recently took a course on this very topic. They are most likely going to use 1% of your total amount owed which will definitely destroy your DTI.

If your lender is the one that told you this, they were incorrect. 

I'm not sure if you took my initial post as a personal attack or something but I want to assure you it was not. 

[Anonymous]

I understand what Eve was saying and VA’s post. If a person has 90k in student loan debt and on IBR and that payment amount is $150/mo, it does not matter. 1% is higher ($900/mo) so that is why it will be used. In VA’s post it even shows that the greater must be used regardless. Only way around it that I can find is a graduated repayment plan and I don’t even know if that would work but it does fully amortize the loan BUT the payment amount increases every 24 months.