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Seeking Advice - SL Post BK 13 Prepping for FHA Mortgage

FLLGuy
Regular Contributor

Seeking Advice - SL Post BK 13 Prepping for FHA Mortgage

Hello All - (MOD - if you feel this is not the correct Forum Topic to list please adjust as necessary)

 

Recently discharged BK13 which included 7x (4 sub+ 3unsub) Studentl loans from 1999/2001 about $7,575  currently with a loan status (forebearance) with no lates marked good standing.  During BK13 my payments paid off interest and was not priority preferred compared to owed IRS monies.  These loans were transitioned to ECMC (educational collection) and currently in process of being sold to AES.  I do have 3 other student loans i obtained during BK with OSLA totaling about $7K due to work which are actively in good standing paying without issues.  According to both ECMC and DOE these loans were OK before bankruptcy and remain OK meaning there were not in default.  In the next few months I plan to sell and buy a new house (FHA is my only option).  However, i'm aware there's (caivrs) and won't know if there's an issue until the FHA mortgage loan is in-flight, effort to avoid any surprises (lord knows i've had enough these last 5yrs) I want to consolidate old SLs as i understand is the only way to keep off caivrs radar.

 

Here's my thought - I'm open to suggestions:

  • Thought#1 - Leave current 3x SL's w/OSLA alone continue paying as normal. (pondering maybe consolidate this separately )
  • Thought#2 - Consolidate old 7x loans to one loan simplify management under same OSLA servicer. 
  • Thought#3 - This should course correct and surpress caivrs during FHA loan process.
  • Thought#4 - Home sale proceeds plan to pay off old school debt. 

I've been racking my brain for days consumed staying up late nights reading FicoForums on sound advice for the next best foot forward.

 

What do you guys think?   Is there something else I should consider?  Anything  you think i may be overlooking?  Should I do standard or ICR?

 

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Message 1 of 7
6 REPLIES 6
calyx
Super Contributor

Re: Seeking Advice - SL Post BK 13 Prepping for FHA Mortgage

You will definitely want to check in with your mortgage person about ICR vs standard.  My understanding is that if you are on income based, sometimes it doesn't reflect well with DTI (they take a certain percentage of the loan as your monthly payment vs the amount actually paid every month).

As for consolidating - I would avoid that if possible.    Mortgage scores react badly to new accounts, and by consolidating, you'd be resetting your AoYA (bad) and possibly reducing your AAoA across scoring thresholds. 

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Message 2 of 7
FLLGuy
Regular Contributor

Re: Seeking Advice - SL Post BK 13 Prepping for FHA Mortgage


@calyx wrote:

You will definitely want to check in with your mortgage person about ICR vs standard.  My understanding is that if you are on income based, sometimes it doesn't reflect well with DTI (they take a certain percentage of the loan as your monthly payment vs the amount actually paid every month).

As for consolidating - I would avoid that if possible.    Mortgage scores react badly to new accounts, and by consolidating, you'd be resetting your AoYA (bad) and possibly reducing your AAoA across scoring thresholds. 


@calyx- thank you and I appreciate your response.  It's been interesting discoverying along the way prioritizing between doing all possible to keep mortgage scores up and satisfying FHA guidelines with school loans.  I'll reach out to the LO regarding the ICR vs Standard.










Message 3 of 7
dragontears
Valued Contributor

Re: Seeking Advice - SL Post BK 13 Prepping for FHA Mortgage

If your loans are in good standing you shouldn't have a problem with getting FHA, problems are when you have defaulted student loans. 

Even in forbearance, worse case they use 1% of the balance in DTI calculations. If I understand your post that comes to ~$140 total for all of your loans. If that is too much take the loans out of forbearance. 

Scores hover around 800
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Message 4 of 7
FLLGuy
Regular Contributor

Re: Seeking Advice - SL Post BK 13 Prepping for FHA Mortgage



thank you - that's good to know currently my overall DTI is less than 24%.  Left VM for my LO today hoping a call back by tomorrow.



@dragontears wrote:

If your loans are in good standing you shouldn't have a problem with getting FHA, problems are when you have defaulted student loans. 

Even in forbearance, worse case they use 1% of the balance in DTI calculations. If I understand your post that comes to ~$140 total for all of your loans. If that is too much take the loans out of forbearance. 











Message 5 of 7
kariered
Established Member

Re: Seeking Advice - SL Post BK 13 Prepping for FHA Mortgage

I've been through the student loan default and the FHA mortgage. If your loans aren't in default and current, you should be fine. Also, I will echo the others on here: do not consolidate. Don't do anything to change accounts that will show up on your credit report. From my own personal experience, consolidating my loans made my payment go up. And they added lots of fees. I have the FFELP loans (they don't exist anymore) and I consolidated in 2005. It didn't help me, which is how I ended up in default. I managed to rehabilitate my loans later, right before I applied for a mortgage.
Message 6 of 7
FLLGuy
Regular Contributor

Re: Seeking Advice - SL Post BK 13 Prepping for FHA Mortgage


@kariered wrote:
I've been through the student loan default and the FHA mortgage. If your loans aren't in default and current, you should be fine. Also, I will echo the others on here: do not consolidate. Don't do anything to change accounts that will show up on your credit report. From my own personal experience, consolidating my loans made my payment go up. And they added lots of fees. I have the FFELP loans (they don't exist anymore) and I consolidated in 2005. It didn't help me, which is how I ended up in default. I managed to rehabilitate my loans later, right before I applied for a mortgage.

thank you for sharing your experience - I will leave it as is, which is what the LO recommended.  Interesting when I spoke with the folks at DOE they were encouraging me to consolidate.  thank you once more.










Message 7 of 7
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