Student Loans and Home Loans
Today we’re going to talk about Student Loans and how they affect you getting a home loan.
In the past, we didn’t even have to count the student loan and your debt to income ratio if those loans were deferred. But recently, we’ve seen an uptick in the the volume and the amount of student loans that people are coming to us with. So the agencies came out and changed their guidelines and as a matter of fact, every agency is now handling student loans differently than they did previously. So today we’re going to go into how each agency handles a student loan.
But let me tell you the best thing to do is just to call our office. Let us take a look at what you have as far as student loans. And we can tell you what we have to use as a calculation.
So Fannie Mae requires a 1% calculation or the amount that’s on the credit report, as long as that’s a fully amortizing payment or a calculated payment based on the prevailing rate of the student loan. If the repayment terms are unknown, we can just calculate that payment. A Freddie Mac will allow us to do basically the same except it will allow us to use a half a percent of the student loan as a payment. FHA and VA have their own guidelines as well. Years ago we didn’t even have to deal with student loans because they typically didn’t count in the debt to income ratio because they were still deferred or for various other reasons.
Listen, there’s a lot of things that matter with student loans. They can be in deferment, which just means you not making payments cause maybe you’re in school. They can be in forbearance, which is usually when you have a financial hardship or something along those lines. There’s an income based repayment plan where basically the payment is set up off of your current income. There’s graduated payment plans, there’s all sorts of different ways student loans are paid and each different way will determine how it’s handled in your debt to income ratio.
So call our office, get a prequalification, and we’ll take care of calculating the debt, student loan debt, and putting it in your debt to income ratio at the lowest amount we can possibly use.
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Fairway 365 Branch Manager
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