USDA Direct & IBR Student Loan

[stinastina]

Does anyone know if the policy has changed recently ? My underwriter said it has and now wants to have a talk with me tomorrow. If it has, I will be crushed. I have been workingon my app since December and just got a 60 day notice from my landlord. 

[ShanetheMortgageMan]

How was your student loan payment initially being calculated?  What did the underwriter say the calculation is being changed to?

Since at least 2014, USDA has always required student loans to qualfify at 1% of the loan amount if the current payment isn't a fixed payment.

USDA guidelines used to read:

Lenders must include the greater of one percent of the loan balance reflected on the credit report or the verified fixed payment due by the loan servicer. Fixed payments have a monthly amount that is not subject to change through the fixed repayment time frame. Income Based Repayment (IBR) plans, graduated plans, adjustable rates, interest only and deferred plans are examples of repayment plans that will require a calculation of one percent of the loan as these plan types do not represent a fixed payment.

USDA guidelines now read:

• Fixed payment loans: A permanent amortized, fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed.
• Non-Fixed payment loans: Payments for deferred loans, Income Based Repayment (IBR), Graduated, Adjustable, and other types of repayment agreements which are not fixed cannot be used in the total debt ratio calculation. One percent of the loan balance reflected on the credit report must be used as the monthly payment. No additional documentation is required.

https://www.rd.usda.gov/files/3555-1chapter11.pdf page 3 is where it can be found.

Completely missed the "Direct" part of your post.  I'll see if the Direct version has made any recent changes.

[stinastina]

Thank you.

Plan B - I contacted my loan servicer and they agreed to switch me to a plan where I pay $28 per month which would not hurt my dti as far as qualifying but I would have to remove my dependent. 

[stinastina]

Any idea, @Shanethemortgageman ? I spoke to the iWorks but he said he couldn’t find what he was talking about. He said he would get back to me but so far nothing.

[ShanetheMortgageMan]

The housing director of the CA office never called back, so I was able to get a hold of a local area specialist in Northern California.  She said with student loans, the actual monthly payment can be used if it's in repayment status as long as you have a score of 640+, need to have 2 trade lines be open for 24 months (with activity), No significant delinquency (BK, FC) in the past 3 years, and the payment shock is not more than 100% (i.e. if your current housing payment is $1k then the new housing payment can't be more than $2k).  She wasn't aware of any new changes.

[stinastina]

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@ShanetheMortgageMan wrote:

The housing director of the CA office never called back, so I was able to get a hold of a local area specialist in Northern California.  She said with student loans, the actual monthly payment can be used if it's in repayment status as long as you have a score of 640+, need to have 2 trade lines be open for 24 months (with activity), No significant delinquency (BK, FC) in the past 3 years, and the payment shock is not more than 100% (i.e. if your current housing payment is $1k then the new housing payment can't be more than $2k).  She wasn't aware of any new changes.

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Thank you for looking into it for me. I just spoke to the underwriter and he said he would call me back. My middle score is 692. But my pament shock is higher. I do recall that if your score is over 680, they can overlook payment shock. 

[stinastina]

@Shanethemortgageman - The UW called me today and told me word for word what you told me ! So, the next step is he is going to ask for a waiver for my payment shock since my scores are over 680. Thank you so much for your help !