March 9th, 2016 | Debt
Today an excellent synopsis of Student Loan Debt and how it relates to getting a Mortgage was posted by Sheri Jones, Real Estate Agent with Prudential California Realty in Rancho Cucamonga, CA for the ActiveRain community.
She says, and we post her article here:
"For first time homebuyers carrying student loan debt, there are rules that were put in place at the end of 2014 that affect how you qualify. Before September 2014, FHA treated those with student loan debt graciously on DTI (debt to income) calculations. If an applicant was granted a a payment deferrment for at least 12 months on their student loan, FHA instructed loan officers to ingnore
the debt for DTI qualifying purposes.
Under the current rule, the agency will require that two percent of the outstanding loan balance be counted in calculating the monthly DTI. For example, if you have a deferred student debt balance of $20,000, FHA will now include a two percent ($400 a month) repayment obligation in calculating your DTI. Fannie Mae and Freddie Mac use one percent. If you have a non-deferrred payment plan, the actual monthly payment will be counted towared your household debt.
FHA historically helps first time home buyers and lower income buyers. So why the increased retrictions?
According to Brian Sullivan (FHA spokesman), “Deferred student debt is debt all the same and really must be counted when determining a borrower’s ability to sustain both student debt payments and a mortgage over the long haul. The agency’s primary goal is to put first time home buyers on a path of sustainable home ownership rather than being placed into a financial situation they can no longer afford once their student debt deferment expires.”
If you have student loan debt and are looking to purchase your first home, contact an experienced mortgage loan professional.
They will be able to review your financial situation and counsel you on the next steps to take toward home ownership!"