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CONFIRMED!! FHA loan with defaulted student loan in rehab!

New Member

Re: CONFIRMED!! FHA loan with defaulted student loan in rehab!

My experience, even with this information I was denied and told my loan had to be rehabilitated and out of default before I could qualify for a FHA loan. I am 3 months into rehabilitation with 2 more to go before I I can request to get loan out of garnishment but 5 more months of rehabilitation. I hope there can be a better solution in the future!
Message 11 of 15
New Visitor

Re: CONFIRMED!! FHA loan with defaulted student loan in rehab!

I can tell you how ours went down. We ended up not being able to get a FHA loan with the old loan in default. We entered a rehab program and our mortgage broker was able to qualify is for a conventional loan. We had to supply all documentation and contact info from the rehab company. On top of this, we also battled un payed taxes on my husbands part. That was paid as well and we closed on our house in September. We managed to also qualify for down payment assistance through the state of NC. I owe it all to my mortgage broker. But can say, FHA will not happen with anything in default.
Message 12 of 15
New Visitor

Re: CONFIRMED!! FHA loan with defaulted student loan in rehab!

Thank you so much for the update. You are so fortunate to have had a good mortgage broker.
Message 13 of 15
New Visitor

Re: CONFIRMED!! FHA loan with defaulted student loan in rehab!

That is complete BS!! this is an email I received DIRECTLY from the FHA! NOT a lender who does FHA loans. Tell them to get off their butts and research!!


Dear Terri Avery ,

Thank you for contacting the FHA Resource Center. A response to your inquiry is provided below. If the information does not fully address your question, please forward this email (do not reply) to answers@hud.gov, and provide additional information so that we may better serve you. You may also speak directly to a customer service representative by calling 1-800-CALL-FHA (1-800-225-5342) or visit our online knowledge base at www.hud.gov/answers, 24 hours/7 days a week.

Your question was regarding Student loan CAIVRS  .

Please see below the following excerpt from the HB 4000.1 regarding student loans. The highlighted portion best pertains to your question.

4000.1 II. A. 4. iv. (H) Student Loans (TOTAL)

(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:

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.



If the repayment plan will fully amortize the loan over its term, then yes, it can be used.

DE underwriters are expected to exercise due diligence in their review of the case file and apply basic underwriting criteria to their specific situation and make the appropriate determination.

Sincerely,

FHA Customer Service Team
Message 14 of 15
Established Contributor

Re: CONFIRMED!! FHA loan with defaulted student loan in rehab!

When we went to buy our house, I was a year into my rehab and we wanted to do an FHA, our mortgage broker gave it to us straight and said flat out leave me of the loan or would risk not being approved or having to go conventional with a higher dp. He said let my loans be in repayment a bit longer and refinance back into an FHA adding me on. Doing that worked, we ended with a lower interest rate and payments, we did that exactly at the 1 year mark. THe only way that hurts more then helps is if the person with the bulk of the income is the defaulter. If any of you find yourself thinking you have a default and it isn't a private student loan check https://www.nslds.ed.gov/nslds/nslds_SA/ and click on Financial Aid Review, that will tell you the balance and who the current servicer is to try to get it rehabbed or consolidated.

Fico 8 starting scores 09/27/15 EQ: 646 TU: 622 EX: 668 5 collections 1 PR reporting across the board
Scores 06/30/16 EQ: 685 TU: 699 EX: 695 1 collection now reporting on EQ and EX and 1 PR on EQ
Current scores 11/4/2016 EQ 688 TU: 705 EX: 736 No collections no PR/Judgements Finally Clean
Message 15 of 15