We’ve had a ton of questions from folks, looking for information about their Student Loans, and how the payments on the deferred student loans, and IBR Student Loan payments will be looked at when they are applying for a mortgage. Unfortunately, these questions are pretty difficult to answer in any “broad” way… because every mortgage program looks at both Fixed Payment Deferred Student Loan payments, and Student Loan IBR and Mortgage Qualification in 2019 a little differently.
I’m updating this post on September 23, 2019
(JUMP TO LATEST USDA Home Loan UPDATE REGARDING STUDENT LOANS)
Prior to this update, there were many different options for those who wanted to buy a house when they had Student Loans in a deferred status, or IBR or PAYE. However, over the last 12 months, the options for buying a house for those with Student Loan debt has become less complicated, if not harder.
Because of that, as you read the more than 300 questions in the comments, you will see varying answers, as the guidelines changed over the last 3 years.
The updated information contained here is as accurate as I can make it regarding Student Loan (IBR) and Mortgage Qualification.
I decided to use some of the actual home buyer questions, and situations we’ve talked to people about – in an effort to answer Student Loan IBR Mortgage Questions.
UPDATE:
September 23, 2019… USDA Rural Development just issued this change:
Student loans. Lenders must include the payment as follows:
- 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. The higher of one half percent (.50%) of the loan balance or the actual payment reflected on the credit report must be used as the monthly payment in the underwriter decision. No additional documentation is required.
March 1, 2018.. we’ve always told folks that they had to have A PAYMENT, NOT ZERO for Student Loans to work. That has changed. Fannie now Allows for ZERO payment IBR to count as Zero. Freddie Mac Counts .5% of the balance if the loan is not fixed rate.
QUESTION: Credit – Student Loans (Reference B3-6-05 Monthly Debt Obligations – Student Loans)
Some income-driven repayment plans allow a borrower’s payment to go to $0. In that case, how is the student Loan payment calculated?
ANSWER: As long as your can provide documentation showing the income driven payment is $0, you can qualify the borrower with $0 for the monthly qualifying payment.
OUR COMPANY STANCE: We are to take the paperwork given us by the borrower and send that to the credit bureau for them to reflect IBR (or income driven repayment plan) on the credit report with the actual payments – and no end date. Most of the letters we are seeing have an end date on them, and that becomes tricky for Underwriters… so this is how we are handling that issue. If you are talking to a Loan Officer who doesn’t know as much as you do, call the next guy on the list, or tell them to call me.
Student Loan IBR and Mortgage Qualification 2019
Student Loan IBR and Mortgage Qualification is based upon the Mortgage you are applying for. Our experience, is that so many people have Student Loans, that it’s really not a “red flag” to underwriters, it’s just another obligation that we have to present in the debt to income ratios. In some limited cases, we do NOT have to count Deferred Student Loans – in other situations we do.
QUESTION: Eleanor, Do you guys understand how the federal student loan income based repayment plan works?? My wife and I are both employed but have substantial student loan debt. My wife is working as a Teacher, and because of the low-income area she is in, her Student Loan will actually be “forgiven” by the State once she fulfills her commitment. Our credit reports do not reflect our actual monthly student loan payments because we are on the IBR plan. What can we do to get our Government Mortgage loan approved? I have the letters from the creditors to show what our payments actually are.
ANSWER: With VA Loans, the Underwriter will take the actual payment from documentation we provide for the IBR payment. If the Student Loan has a 18 month deferment or more AT THE TIME OF CLOSING (which is the hat-trick) , we don’t have to count the debt at all. If the deferred student loan has less than 12 months left on the deferment – then we use 1% of the balance. READ: For Most Lenders you will need at LEAST 12 months after closing to be documented as DEFERRED STATUS.
If we can provide supporting documentation from the creditor to show future estimated monthly payments, we can use that figure instead of the guideline. Fortunately, you have that documentation. VA Loans have no down payment requirement for those Veterans that qualify.
VA LOAN RED FLAGS** MANY LENDERS (however) use the same underwriter for VA Loans and FHA Loans. Because of this, MANY UNDERWRITERS will use the same Guideline for FHA Loans and VA Loans just like they were the same program. MY ADVICE is that you ASK the lender how their underwriter treats IBR payments on a VA Loan. We just had a deferred loan that shows on the Credit Report that it’s deferred until June 2019, and the Underwriter did NOT make us count any payment in qualifying the Veteran. So ASK!
FHA LOANS Since June of 2016 – IBR Payments and PAYE Student Loan Payments must be calculated by FHA as 1% of the Balance owed. If we can establish a NON IBR payment, we can count the ACTUAL payment on ALL Student Loans in qualifying a borrower for a mortgage.
I’m going to say that again…if we can establish the payment amount that is from a LEVEL payment plan (so higher than any IBR payment), we can count the actual payment, and not the 1%.
However, if we can NOT establish a payment that is a NON IBR payment, then we will be required to count a payment of 1% of the balance owed for all FHA and USDA Home Loans.
For IBR Student Deferred loans – which have payments that are subject to CHANGE based upon your income – starting 12/1/14 we are required to count 1% of the balance, regardless of deferment status. You might read somewhere else on the Internet that we can count $100 in payments – this is outdated information!
See the Actual New Guideline as showing from the NEW USDA Home Loan / Student Loan IBR and Mortgage Guidelines
Student loans as of 9/12/19: Lenders must include the payment as follows:
-
- 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. The higher of one half percent (.50%) of the loan balance or the actual payment reflected on the credit report must be used as the monthly payment in the underwriter decision. No additional documentation is required.
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QUESTION: I am single, and recently qualified for the IBR program. I owe a six figure balance to Sallie Mae/Dept of Education for my chiropractic school education. For the next 12 months my payments are zero dollars. I recently applied for a mortgage since my payments for a house will be cheaper than rent (and I would like to get started on my life) but denied – because I couldn’t tell the mortgage company exactly what my payments will be when they eventually start.
I feel like if Sallie Mae needs you to re-qualify every single year for the IBR program, does anyone ever get approved for mortgages while on IBR? I know my income will never increase to the point that I will pay more on the IBR plan than the standard plan since my payments on the standard plan would be $3200 a month – which is more than I will make just 2 years out of school…Any suggestions are definitely appreciated.
ANSWER: Many borrowers have this problem. If we can establish an IBR Payment amount on a Credit Report, we can qualify you on that payment for a Conventional Fannie Mae loan. Fannie Mae is now (effective January of 2018) the only alternative for those who are buying a house with student loan debt in IBR Status. Fannie Mae CHANGED their Guidelines on May, 1 2017 and we now calculate your DTIs based upon the payment on the credit report. Even if it is ZERO… we must use the actual payment on the report.
The Freddie Mac program does offer a down payment assistance component now through NC Housing. They also offer a program with a 3% down payment. HOWEVER, the Freddie Mac Loan will accept ratios up to 50%!! Lenders will likely begin underwriting to the new guidelines (requiring a level payment OR .5% of the student loan debt be counted in your ratios).
The Fannie Mae loan does offer a community “Grant” program. It’s available through Housing Finance Agencies all across the country (there’s one in each state), and they will provide a forgivable loan for the down payment. There’s no payment required and no interest accrued. Once you live in the home the specified time (it varies by program) then you owe nothing back. THE DOWN SIDE IN NC is that the MAXIMUM DTI is currently 43.00000000%. That’s tough. The typical back end ratio limit for a Fannie Mae loan is 50.0000%.
Obviously, different story for FHA and USDA Home Loans. In extreme cases, we have seen people go OUT of the Student Loan IBR and mortgage loans were approved. It’s our understanding (but you will need to verify this – maybe you could leave us a comment below and let us know what you find?) that you can go out of the IBR Student Loan Program for a period of time, negotiate fixed payments that you can afford – and we can use that FIXED payment to qualify you for the mortgage… can you go BACK to the IBR repayment plan in the future if your circumstances change? I don’t know the answer to that. I only know that for a FHA Loans, the ever-changing IBR Student Loan Plan forces us to use 1% of the outstanding balance. USDA Home Loans now require us to use .5% of the balance.
QUESTION: My mortgage broker told me that I HAVE to have documentation of what exactly my IBR payments will be for no less than 12 months from closing, however since IBR Student Loans are recalculated annually from my W2’s, they only reflect what they will be for the next 12 months from renewal. For example my documentation shows my IBR payments will be $0 from February 1st 2017 until February 1st 2018, after which it shows the maximum amount of $412, even though when I renew it in January of 2018, It will show $0 until 2019, and so on and so on. So unless I time a closing for exactly the time it renews, my credit report will never show my actual payments for 12 months past closing…. how do I make this work for Freddie Mac?
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ANSWER: All IBR deferred Student Loans for Fannie Mae Conventional Loans, need to be out of deferment. We can’t simply qualify you at the number your Servicer SAYS will be your monthly payment ($412), and we can’t use zero either. There needs to be some sort of payment reflected on the credit report – because it also can’t say “Starting 2 months down the road.”
Bottom line – if you have a DEFERRED IBR STUDENT LOAN, with no payments due – there will be SOME KIND of payment used when qualifying you for a mortgage, if you are applying for any loan besides a VA Loan. This is a HUGE change, as for some folks we talk to, it could be $900 or more a MONTH in debt we are counting against them, when they are not making any payments on those student loans right now!
Again with the Good News! Fannie Mae provides a program where you only need 3% down Payment, AND it can be from a gift, or a down payment assistance. There are “Special Program specific” low PMI Rates for those with decent credit, and we can count border income. My point is that this is a viable option for those who want to buy a house!
QUESTION: Do student loans count against my debt to income ratio on a USDA loan if they are deferred?
ANSWER: With the USDA Home Loan NC program , a minimum payment must ALWAYS be included for any loan even if it is a deferred student loan. This is true even if the repayment of that loan will not start for over a year. (If payments are delayed for more than 24 months – we might not have to count them on USDA Home Loans). In most cases the credit report will not show what that minimum payment will be, so borrowers must get a quote from the Lender and have it added to the credit report. This payment is then used in the qualifying of the applicant. If it’s a Zero payment (which we often see with IBR Student Loans) then we are required to add .5% of the balance.
3 Tips For Mortgage Approval With Deferred Student Loans
Here’s my concern… Fannie Mae could soon announce that they are going to begin requiring us to count .5% of the balance, to follow Freddie. If that happens, I will again update this post. If you want to follow this issue, subscribe to updates.
Mortgage approval with IBR deferred student loans in 2019 can be like working a really hard puzzle – it takes someone who REALLY knows First Time Home Buyer programs to help you get the numbers to work. That’s where we come in – we deal with SOOO many folks who have various types of deferred student loans, we know what WILL work, and what won’t. Call Steve and Eleanor Thorne 919 649 5058 and get Pre-Qualified today! Student Loan IBR and Mortgage information can be misleading – that’s why we tried to provide the most accurate information based upon what OUR bank is seeing!
Wow, I cant believe the FHA changes with regards to IBR. With Obama’s executive order making the Education Dept get together to EXPAND PAYE, an additional 5 million people will now qualify for the reduced payment plans, the PAYE2 version of IBR is going to be the primary choice of student loan repayment by the end of this year. These guidelines will almost have to change to except the IBR payments of there are going to be even less people purchasing hopes here shortly.
You are correct – as the Pay as you Earn program continues to expand – this is going to have a negative affect overall on home buying. Unfortunate.
I think you may be slightly incorrect on the IBR payments after June 2015, if I am reading this correctly they will only use that calculation if your payments are not on your credit report or your payment is zero and/or in deferment.
I could be wrong ( happens often) 🙂
Source: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf
Page 215 top paragraph or simply search the word student.
Mike – I think you are right, however, we’ve gotten documentation from the Banks that we sell FHA Loans to saying that it could go differently. As soon as I get firm confirmation that there’s an Investor that will look at it this way – we will update.
The current “consensus” is that Investors are going to treat ALL government backed loans the same… and this is definitely the way USDA Home loans are treated. I recognize that I’m putting a VERY conservative interpretation out there.
THANK YOU for following up!!!
If you start the loan process before June 15 2015 and your loans are deferred but your closing is set for July are you grandfathered into the old process? Do you have to close on your house before June 15, 2015 for your loans not to count with FHA?
I’m trying to make sure I understand correctly. So after June, FHA will still allow IBR amounts? What if the payment is under $100? Or, will they automatically impose the 2% rule on all IBR cases?
The case number needs to be pulled (put through the FHA System) prior to June 15, 2015. This is something that can be done the day the contract is written. You have 90 days to close.
Sorry for the confusion. Here’s what we are now being told.
If the credit report shows a payment – we can count that payment. If there are NO PAYMENTS showing, meaning they are in deferment and we can not GET a payment from the Servicer then we count 2% of the balance. A payment can verified directly from the Servicer … starting mid June. Until then, if you are in deferment for at least 12 months, we do not count any payment.
Hello,
What happens when a loan is in forbearance? my boyfriend is looking to buy a house and he has a statement of his student loan that says is in forbearance since 2011. What does it mean? and is the payment counted on the calculation of monthly debt?
It will depend on WHEN he applies for a loan and what KIND of mortgage he applies for. With Student Loans that are an IBR, in deferment applying for a FHA loan prior to June 15, we might not have to count it. If he is applying for a USDA loan, at any point, with any kind of deferred loan, yes, the payment will be included in the Debt Ratios
Any idea how conventional loans handle IBR payments? Is it true that they don’t consider the actual payment under IBR, but instead use 1% of the entire balance due? Thanks!
Her’s more information on the current Fannie Mae guidelines regarding IBR Payments
Payment Calculation for Student Loans
Fannie Mae requires that all deferred installment debt, including student loans not yet in repayment, be included in the calculation of the borrower’s debt-to-income ratio. In determining the payment for deferred student loans, Fannie Mae currently requires that the lender obtain a copy of the borrower’s payment letter or forbearance agreement or calculate the monthly payment at 2% of the balance of the student loan. Research has shown that actual monthly payments are typically lower than 2%. In addition, many student loan repayment structures now use an income-based approach in calculating changes in the payment due over time.
As a result, Fannie Mae is modifying the monthly payment calculation from 2% to 1% of the outstanding balance. In addition, for all student loans, regardless of their payment status, the lender must use the greater of the 1% calculation or the actual documented payment. An exception will be allowed to use the actual documented payment if it will fully amortize the loan over its term with no payment adjustments.
I have 150k in student loans with a $400 monthly payment under IBR. So am I understanding the language correctly that Fannie will count $1500 and not the $400? (I hope not!!!)
Tom – no, if we can establish what the payment is, then we count the payment. If we can NOT establish what a payment will be, and some folks with IBR deferred Student loans can NOT get us any information on what those payments are going to be – then we must count the 1%. ONLY in the situation where we can not establish what payments are. Call us, and we will be more than glad to go over your particular situation. 919 649 5058
I live in indiana and im trying to get a house i am on the IBR and my payments are $0. Is there anyway for me to get approved for a loan? I have money saved for a down payment and my loans have been in repayment for 7 months.
Alisha – yes, if you buy a house before mid September, you can get approved for a FHA Loan. After that point, we will have to count all of your Student Loans against you.
I’m confused, the deadline is 6/15/15 for the new student loan changes but when I go to the Hud.gov document on it, it says “Effective 9/14/15”. I am in-school deferred until 2018, but I am able to generate a mortgage letter of estimated payment and it says $360 without any options to chose what type of repayment I want to do (i.e. PAYE PAYE2, IBR, etc)
Please advise
This was changed from 6/15/15 to 9/14/15 within the last week. Sorry – I’m updating that now. As far as the mortgage letter you can generate – if it says your payment will be $360 – then that’s what we are going to use effective in September. If we can prove that they are in deferred status until 2018 – then BEFORE the change is made, we don’t have to count ANYTHING.
After the change this fall, if your Servicer will calculate out a lower payment based upon PAYE or IBR then we might be able to use that. It will depend on the wording. Actually, having none of the PAYE or IBR on the letter is best.
This is NEW to all of us. Because of that, we don’t know if the FHA Underwriters are going to treat the Student loans the way USDA Home Loan guidance reads. Under the USDA Guidelines, you must have a FIXED payment… that’s why I was saying if it says NOTHING about the repayment TYPE we are likely to be better off. Hoping this make sense, I’m about to change the date on the post to 9/14/15 as an Update. THANKS!
Just to clarify, will FHA still allow IBR payments and what’s reported to the Bureau after Sept? Or will the automatically impose the 2% rule if one is currently in an IBR plan?
So if I have a zero dollar payment on the IBR plan (and can prove it’ll stay that way 12 months from closing), FHA will count zero for my student loans? Or is that only for deferred loans? (My student loan company said they do NOT consider me in deferment.)
I had a lender who preapproved me for a USDA loan by not counting my student loans. She said everything was fine and as long as I could prove that I had a zero payment then it would all work out. I even started looking at houses! Does that mean she was wrong? I’m glad I saw this page because I would’ve been very mad if I made an offer on a house only for my loan to be rejected because she didn’t know what she was talking about!
Karen, thanks for asking. The answer is that we are not sure if FHA Underwriters will apply the same ruling that USDA Home Loan Underwriters have.
The way it’s WRITTEN is to say that as long as we have a payment – we’re golden.
If we can NOT establish a payment – then we are required to use 2% of the balance.
USDA Underwriters are under guidance to require FIXED PAYMENTS – so big difference. As we get closer, I will update with what we are actually SEEING Underwriters accepting.
Marissa – you need to call us 919 649 5058. We need to talk about this. You can’t have a “zero payment.” And yes, USDA definitely is going to count a % of the balance on ANY IBR loan. Please call us, and we’ll talk with you about your options. We are working with hundreds of folks in NC right now who have Student Loan debt and want to buy a house! It’s a great time to buy – but it can be tricky. The USDA Home Loan guidelines changed in December. It’s possible that the loan officer just hasn’t done very many USDA loans… we have.
My fiance and I were preapproved for a mortgage and recently had an offer accepted on a house. We’re signing the P&S this week. I have 100,000 in student loan debt, but only pay $280/month because I am a teacher in a low income area and I’m on an income based repayment plan. My payment shows up on my credit report as $280 and has been roughly that amount for the past four years as I’ve been working in the same district and my salary hasn’t changed significantly.
We close on June 29 and it’s a conventional loan- not FHA or USDA. Will the underwriter use my current payment when he starts going through our application or is he going to take a percentage of the balance?? If he does the later, our loan is going to be denied. I’m in a panic right now.
If the payment shows as $280 and it doesn’t say IBR or PAYE next to it, you should be okay. Most of the reports we are reading don’t. If you run into any problems, call us! We can do loans that will close that quickly, and if you qualify – we can also offer you a mortgage tax credit, which is a great perk. YOu have to get the mortgage tax credit when you apply for your mortgage. Our number is 919 649 5058
I have student loans that have been in repayment for a year and a half now, the payments are around $870 per month. I have never paid these loans as my parents make all of the payments since they went into repayment, and they have all of the bank statements to prove this. I am wondering if this will be factored into my debt to income ratio when qualifying for a mortgage. Also, the monthly payments go to 5 different lenders. One of the student loans is in IBR, it is only $20 a month right now, but that is based on my previous salary and I started a new job in January (making more than double i was before). This will be reevaluated again in January and the payment will go up based on my current salary, but again, my parents will continue paying making the payments. I was planning on starting to look for a house in the fall so we definitely wouldn’t close before September. So, when we apply for a mortgage, would they be taking into considering the IBR amount or the amount that it will go up to after January? I’m not sure if it says ABR on my credit report next to the loan…how would I find out? I’m afraid to run my credit report because I was under the impression that inquiries can reflect negatively on your credit. This is giving me so much anxiety!! Please help!
GREAT QUESTION! We do the same thing for our son. If you have 12 months of evidence someone else is making payments on time, they will not be counted against you (at our Bank). 24 months of this type situation is BEST.
HOWEVER – If your parents are paying YOU and then YOU are actually making the payments it is MUCH tougher to make that work. Because, technically, YOU are (in that situation) making the payments. If on the other hand, your folks are actually writing the checks to the Student Loan Servicers – we are Golden!
In regards to the one that is IBR – we have a payment amount $20. FHA “rule change” simply says we must establish a payment. So, if you purchase before it goes up, and your folks have been making a $20 a month payment – it won’t matter. Once the payment goes up, assuming I could prove they’ve been making those payments, I still wouldn’t have to count them.
IF your parents have been paying you – and you have been paying the Servicer, call me at 919 649 5057, I’m probably going to suggest that they start making payments directly to the Servicer beginning today.
Thank you sooo much!!!! That is great news! My parents pay directly to the lenders and it says so on all their bank statements! So as long as i purchase the home before my IBR loan goes up (it actually goes up in march i asked my parents) then it should be okay!
Also does it matter that i live in NY not NC? Is the policy the same?
Nicole! Yeah! This is great news! FHA Rules are FHA Rules. Yes, some banks have “overlays” meaning their own guidelines. So you just need to ask the bank.
I SUGGEST that you contact a lender who is set up to also offer you a Mortgage Tax Credit. Those of those who work with the MCC program are WAAAY more familiar with Government Loan Guidelines that most other lenders. In NY you can find the list here: http://www.nyshcr.org/Topics/Home/Buyers/ParticipatingLenders/
I don’t know enough about your particular situation to know if you qualify from an income, debt ratio etc. basis – but if you do, you should take advantage of it :0) YEAH!
Thank you! You are so helpful! But now I am hearing that my parents must be cosigners on the student loans in order for this to work. That makes me nervous because they are not 🙁 Do you know if this is true? I am trying to ask around to different places to make sure I get all of the right info.
This information seems to be really specific! I’m so glad you know your stuff, for our benefit! Thank you it is much appreciated! Our credit report is finally showing our PAYE payment of $29 (on a 190k series of loans- we have 4 dependents which is why it is so low). We have a downpayment and are fine with whatever kind of loan. Our credit report does not show PAYE (just that a payment IS due) however it is not showing a monthly term connected to the credit report. Is this normal? Will they use the $29 or the 1%?
Amanda! Thanks! If you are applying for a FHA loan, it won’t matter if it’s a PAYE or an IBR loan. We just need a statement from the folks you make your payments to that the payment amount is $29 and we can use that. We don’t have to use a percent of the balance on a FHA loan, if we can establish what the payment is 🙂 Call us with questions 919 649 5058
Nicole – that must be a requirement of the bank you are applying through. If you can establish that your parents have been making the payments, they should NOT be required to be on the Student Loan as a Co-Signor. We see this all the time.
Hello,
I’m in a unique situation here. I helped co-signed some graduate student loan for my sister, who’s currently in dental school. I co-signed about $120k worth of student loan and it’s now showing up on my credit report. I am trying to do a refinance on my house and this debt is counted against my DTI.
My question is, even though the loans are in deferment, and the due date is some time in 2017. However, they seem to have already attached a payment on it, they’re basing the repayment numbers using their standard repayment plan. So even though the loans are in deferment since my sister is still in school until summer of 2017,
So effectively, with their projected “standard repayment” plan, they’re projecting a roughly $1700/month, which shows up on the credit report. How can I convince them to use the 1% (which would be $1200/mon) since this is the new fannie mae guideline for deferred student loan (effect April 1st, 2015)?
It’s frustrating that they won’t let me use the 1% even though it is clearly in deferment, and they insist on using the standard repayment numbers which is what is showing up in the credit report.
Thanks.
You need to talk to whoever is servicing that loan, not just go through the standard portal. We’ve done this with borrowers before (many times). We put the borrower on the phone in a conference call with the Credit Bureau and the folks who are servicing the loan. That way the credit bureau is picking up the correct information. If you are in NC, we’d be glad to help. Give us a call at 919 649 5058
Thank you for replying. That’s a great suggestion. And I am in Oregon. But your blog has been great with information I need. I really appreciate it!
I’m so glad! Good luck, and CONGRATULATIONS on buying a home! 🙂
I was concerned about this too before we applied for a mortgage, but IBR is really no big deal. In fact, it might even work in your favor. My husband is currently on IBR. He currently makes around $112,000 with bonuses per year. He only qualified for IBR because he was hired in September the year he finished grad school and only had 4 months worth of income that year. I make very little (about $8,000/year) as a substitute teacher, so my income is basically inconsequential in all of this. My husband graduated with about $75,000 in student loan debt, all at 6.8%, and he currently owes around $57,000. We signed up for IBR as a sort of insurance in case we had some kind of emergency and needed to lower our monthly student loan payments when we were just starting out. As of this September, he will no longer qualify for IBR. Even though we are currently still on IBR, we usually pay the same amount that we would if we were on the standard repayment plan. The minimum payments under IBR are around $450/month. Our only other debt is the minimum payments on our credit cards (we pay them off in full each month, so they just use the minimum when calculating DTI), so that adds another $100/month to our DTI ratio. The banks do not care one bit that we are on IBR. They use the IBR payments when calculating debt, so our total monthly debt is $550/month, and our monthly pre- tax income is around $9400/month, making our DTI without a mortgage around 6%. It is important to note that because we have two borrowers with FICOS in the low 800s, most lenders we talked to automatically extended the qualifying backend DTI up to 45%. We applied for a 5% down conventional loan and were approved for the maximum amount allowed for conforming loans, which is $417K. We were actually fully underwritten for a $327,000 mortgage, but the deal fell through due to inspection issues with the house we were planning to buy.
Frankly, I think qualifying for a mortgage is too easy. There is no way we could comfortably afford a 30 year mortgage on a $417,000 house while paying off student loans and adequately funding both our 401Ks and IRA and our HSA accounts. In our case, the fact that we live in a state with relatively high income taxes also affects how much we can afford. Although our gross income is nearly $1,000/month, our ACTUAL net income is closer to $6600/month. I’m not complaining, but I wanted to point out that DTI can be a little bit deceiving because it is based on gross income, not net income. Just because you qualify for a mortgage does not mean you will be able to actually make the monthly payments. You don’t want to be house poor.
I am trying to close on a contract for a mortgage. Two days after I was supposed to close the lender tells me they need to verify my student loan payments which are in IBR. I did a conference call and thought it was ok.
The lender then said the payment was too “low” and requested more info. I sent them a statement showing my breakdown of what I pay but they still said no. They asked for a payment schedule. I sent it in but since I sm up for recertification, it’s showing a higher amount beginning in August.
At this point I am 3 days past closing and my contract will expire at the end of the month.
Any advice? Try another lender? Try FHA? This is for a conventional 97% with Fannie Mae
Nicole – I’ve been on vacation – so I VERY MUCH APOLOGIZE for being late in responding!
Fannie Mae is looking for fixed monthly payments. You will probably have to switch to a FHA Loan. I”m so sorry your loan officer didn’t talk with you about this when they took the loan application.
I am currently on the IBR payment at zero/monthly payment. I just received a raise and it looks my IBR payment will be transitioning from zero per month to $150 per month. Can I still be on the IBR plan while trying to obtain a mortgage since I will now have a set payment? My loan officer doesn’t think that will work. He wants me cancel the IBR and do regular monthly payments, but I can’t afford that as it would be double and half of what my IBR payment is. I also don’t think I’d be approved for a mortgage at the monthly rate my student loan payment would be. What do you suggest? BTW, I’m in California- not sure if that makes a difference.
Hi
I am in the process of getting a mortgage and wonder if this will work. My LO had suggested that I have my loans in forbearance and we get documentation that I can continue with my forbearance even after closing on the loan. Have you heard of this? Basically, my loans are around 11months deferred instead of 12 and they are saying that I can simply get information about me being eligible to continue that deferment we are good to go. Just wondering if this would work? I know each lender is different so wondering if you have ever heard of it being acceptable. I simply wanted to utilize my IBR payment as the payment amount that is utilized instead of this route but this was my lenders suggestion. I just do not want to run into issues when my loan makes it to the underwriter.
Hi, I am not a NC resident, but find you to be “the” expert on IBR-related problems when applying for a mortgage. My situation is similar to Nicole’s above (July 2015), though more egregious in that I emailed the lender with whom I was going through the mortgage application process several times in early June re: one of the items in the list they sent to me, which was the “fixed” student loan payment requirement. I stated that I was on an IBR plan, currently I pay $94 per month. If I had to go on to a fixed plan, my payment would be $1,075 per month! I never received a response from the lender on those emails. Then, days after my scheduled closing date, they tell me they cannot use the $94 per month payment. This is for a USDA-backed mortgage. Is there anything else I can do?? Everything was all set otherwise. I can afford this house (it is cheaper than my rent), everything has been settled – homeowners, title insurance, appraisal, etc., etc. – all paid for and in place. Now this. I will be disqualified if they use the fixed payment amount. Do you have any advice at all? Time is of the essence, as the sellers will likely back out if I don’t have a solid Plan B. I surely wish I’d used another lender, as I feel they have put me in this last-second situation by ignoring my concerns so much earlier on in the process.
Oh this breaks my heart! No, USDA is not going to be the right program for you. The BEST plan B is to tell the Lender to flip you to a Housing DAP program. Not all lenders do them, however, if you close with one of these special FHA loans, then you will be able to use the $94 a month payment. Every State offers these loans and their down payment assistance program. Let me know where you are, I probably have a friend who can help you.
It will depend on the type of mortgage you are applying for… and the folks who are servicing your student debt. Some IBR Service folks will give you a notice (letter) that basically says that if your income stays within a range of where it is now, you will be eligible for the IBR continuing. Then you get a letter from your employer stating that the anticipated Raise for your position is within that range. The employment letter is normally done on a standard Mortgage Form we call a VOE. The Verification of Employment (VOE) form has a portion specifically for raises. The lender must send the VOE out, there’s no need for you to get the form, it will just be redundant.
It doesn’t make sense to go with a fixed payment if you don’t have to. You can get a FHA Loan by Mid September your IBR payment is quite okay. These rules don’t matter if you are in Hawaii, in Florida or NC – these are the rules. Maybe your broker is only looking at Conventional Loans. Not all Brokers offer Government Financing.
I see with FHA your still using the mid september date. It sounded like we were going to be able to use the IBR payments with them, if we could “establish a payment.” Are you hearing differently now?
I was wondering if you have ever heard of lenders being able to confirm that I can continue my deferral out past closing. My lender stated that they can call my student loan company and confirm that I can continue my deferral/forbearance past my closing date. So my forbearance is just a little less than a year, but at the end of that year I can continue my forbearance so they can confirm that I can do so and I will be good to go. Just wanted thoughts on that. I am in the final stages of approval now and just wonder if that could work. I saw where FHA guidelines state:
Debt payments do not have to be classified as projected obligations if the
borrower provides written evidence that the debt will be deferred to a period
outside the 12-month timeframe.
Makes me think that as long as I can show that I can continue that forbearance I should be good to go. Just wondered what your thoughts are based on experience.
Nicole – the trick is verifying it. Yes – some Student Loan services will verify it… some won’t. We can normally get the Servicer to tell us that if your income stays within a certain range you will qualify, and then verify that the range for your job position is within that range.
That’s what we are hearing. Freddie Mac did make a change, which will go into effect on August 1st.
I am so sorry! I am talking about forbearance and not IBR. Basically, can my lender confirm that I am eligible to continue my forbearance not IBR. I am shy of a year from when my forbearance ends not my IBR and my lender has stated as long as they can confirm I can continue my forbearance then they are not required to calculate that debt. So sorry for any confusion. My file is officially with the UW and I should know something soon! So anxious.
Eleanor- I applied for preapproval and all was well. I am on IBR with $147 balance from grad school. My current payment is 99.35. Friday my lender calls and says he isn’t sure of the underwriter approving me because of the total dti ratio. I sent them documentation of my monthly payment and it shows as a constant on my credit report. He only knows I am IBR because he questioned the low payment. Since it is documented basically as a 25 year payment at 99.35, shouldn’t that be acceptable? At my wits end trying to get accurate info. Thanks.
Ok so if i secure a loan by September 14 but have yet to close, will i still be eligible to go by old FHA guidelines as long as I close within 90 days of securing the loan? Also what are the IBR rules with conventional if you have 0 dollar payment?
Are there any updates in regards to how underwriters will interpret the new FHA language? Meaning, will they continue to use the actual IBR payment ( if its greater than zero) listed on the credit report? Or will borrowers be forced to switch to a “fixed” payment after September?
It looks to me like it’s going to be an Underwriter decision. I know that OUR underwriters are simply looking for a payment – meaning not zero – but other companies I’m talking to are looking for a fixed rate.
That’s a tough question. We were originally told that if you had a case number by mid Sept you were ok. We have not gotten confirmation (just checked with the underwriter). We are going on the assumption that is still true. Conventional loans look like this. The new FHA Guidelines are NOT requiring (from the way our Underwriters are looking at it) that you have a fixed payment, we simply will be unable to use a ZERO payment
We would use that. Even the NEW FHA Guideline doesn’t state that it has to be fixed, only that it can’t be zero. If the lender won’t take it, call us! 919 649 5058
Perfectly okay! Here’s the information I have about mortgage approval when you have a mortgage loan in Forbearance.
Thanks! Can you recommend a lender in the Austin, TX area and Baton Rouge,LA area?
Sorry if I am stalking this page, but your the only one that seems up on this stuff. With clients you’ve dealt with that are on one of these income based student loan plans. What does there credit report list for payment? Does it show the actual amount they are paying? Ive seen people say they are on IBR and have a low payment, lets say $100, but the report has their standard repayment plan amount, let’s say $1200. I’m not on IBR yet, but I am curious to see what info is typically shown on credit reports.
Show me the page on the VA web site where it says it is a new VA requirement regarding the 2% on deferred student balances. The VA is saying it is NOT a VA requirement it is credit overlays by lenders and underwriters’ software.
Hello – My situation is a little bit different as I am trying to refinance an existing mortgage on the FHA route.
My lender had a great scenario worked up for us that would save us a couple hundred dollars per month.
I have $240,000 in student loans from Law School, but I still have a $0.00 payment because it was based on my income from 2013. If they base it on my current salary, my maximum payment would be about $287 per month. Nevertheless, my payment is currently listed as $0.00.
My lender said he called their underwriter, and he said that even if we do it under the pre-September 15th, guidelines, they will have to use either (i) the standard repayment amount; or (ii) 2% of the student loan balance. He said the only difference after September 15th is that they will use 1% of the balance instead of 2%. Clearly 2% of the balance would be about 20 times what my maximum IBR payment would be. In my opinion it is ridiculous that the Department of Education and the Federal Housing Administration would have such contradicting rules – why does the Department of Education permit IBR plans, but the FHA disregards them completely?
Based on my situation, do you see any way that we can get them to look at (i) my $0.00 payment, or (ii) the payment that I will be making when I re-certify in November?
I am located in Colorado.
Thanks,
I’m so glad to have found this site, so much good information here.
I would like to ask for some advise on my husbands and I situation. My husband works, I stay at home, though we both have student loan debt of about 60k each. We are both on IBR, with a payment of 0$, for each of us- every month. We live in Texas, and are aware it is a community property state. We do not know if we should apply for an FHA or conventional loan, based on our student debt situation. As far as we understand, in our community property state, BOTH his AND my debt must be calculated in the debt to income ratio. Is that true? If so, that is a problem for us- because we have two student loan debts, but one income. We have paperwork stating that the payment is zero for each of us, each month, but aren’t sure how we should proceed forward. We are working on our credit right now, and are gathering information. If we did not want to my debt calculated into the DTIR, do we have to go conventional? Or can we still use FHA because our payments are 0$ each- each month.. so the debt calculation wont really be a factor?
Please advise! Thank you!
Whatever you do, DO NOT drop out of IBR if you have been in it for any significant amount of time. Why? Because the IBR rules state that at the time of withdrawal from the program, all of the interest that hasn’t been covered by your payment will be capitalized!
This means that your new principle balance will contain all of the unpaid interest, increasing your monthly interest accrual, possibly very significantly. IBR interest does not compound as long as you are in the program.
I have $55k in student loans, husband has $17k both in deferement. Our cars, Miss loan, and quad loan totals $2700. We have some credit card debt but totalling maybe $500/month. We were told no on a prequal because they’re factoring in our school debt and that makes our debt to income ratio 50%.We make 11k+ a month and home would be $417k, approx. $3000 a month! For the life of me, I don’t understand how we are not getting prequal now but we did with another builder a few months ago!
It is all about how the Student Loans are showing on the credit report, and how long they are showing in deferment. You are almost better having some payments right now, because they are counting 1 to 2 percent of the balance each month against you.
You might want to move to NC. We are not a Community Debt State – but while you are in Texas… you might have a harder time making this work.
Seriously! You will LOVE NORTH CAROLINA!
Assuming you like Texas just fine, I would call Tom Burris, one of my good friends who is in Dallas at 214-763-4629. He’s a great lender
I would call Cherry Creek Mortgage in Denver. I think they can help you. Each lender is adding their own “overlays” from what you are saying, in Colorado. That’s simply not the way FHA has this written. Rates have recently dropped – good luck!
Josh the ones we see either have $0 (which is a problem) or even as low as $26 for a $1600 loan. It varies.
In Texas, we refer folks to Tom Burris. He’s in Dallas, but covers the state. His number is 214-763-4629
Small testimonial for you guys! I just got approved and closed on my 1st home with $120k in student loan debt. I was able to have my loans in forbearance for a period that extended close to my close date and my lender was then able to cofirm that I could continue forbearance out past that 12 month period. None of my debit will count against me. However, if necessary they could have used my IBR payments. Easiest thing to do is consult with someone like Eleanor and her team and see what they say. Go with a lender that has in house underwriters as a rule of thumb also. You can get a mortgage. Rates are great and you should get in before the rules become even more stringent. I plan on having my loans on IBR when I do my next mortgage an allowing that debt to count against me as forbearance will soon be something individuals can not use. Bottom line you can get approved guys! Good Luck!
Tom, thanks for your comment on Student Loans. You are right, there are no guidelines that specifically state that VA Loans must count 2%. HOWEVER, we feel that we are “generally” lenient, and our company requires evidence of deferment of 2 years. I amended the post to note this – and I hope this helps!
Hi Eleanor:
I have been on my full-time job since March and have been working with a lender since May. When I first got in touch with the lender, my student loans were in the IBR status of $0. Soon after, I decided to have all of my loans consolidated. While going through the consolidation, I called my servicer to say that I had changed my mind, thinking that was the smart thing to do to try to get a lower payment; however, the day I called, the deadline to make any changes to the consolidation had passed. With much prayer and determination, I was able to get the agent to change my IBR status to a standard payment of $408 after discussing my home purchase situation with them. They had a letter typed up stating this as well.
I emailed this letter to my lender, and he said he could use that payment, but they could not pre-approve me until after I had been at my job for 6 months at the end of September. Just recently, I got another letter from my servicer putting me back in the IBR status of $0 and they also put me in forbearance for one year (until next year’s taxes).
I have not spoken to my lender since this new change, and I am worried that the $408 payment he was going to go with will no longer be valid. I have been paying a little on my loans to try to get some of the interest down.
If you have any advice, I would really appreciate it. Also, if you know of a lender in Richmond, VA that works with hard-to-obtain mortgages, please let me know.
With much thanks!
Oh my – you must be truthful in dealing with the lender. Remember that lenders will pull a credit report just before you close – so your status will likely show up. However, if you have a degree that is in the field you studied in College – we wouldn’t make you wait. If that is the case, you could apply before 9/14/15, and your default status on Student Loans probably wouldn’t be an issue. Additionally, if you have a letter showing what your payments WILL BE there are probably Underwriters who will look at that. I can send you the contact information for a Virginia Loan Officer.
Congratulations on your Perseverance! Home ownership is worth the Effort!!! https://ncfhaexpert.com/wp-admin/edit-comments.php#comments-form
Thank you so much Eleanor. I look forward to that contact information.
Renea – sorry for the delay! John Garofalo covers the State of Virginia, and will be glad to help. His number is 202-262-1824
Eleanor, it seems like you’re the only one who understands this stuff!! Do you have a recommendation for someone in New York? I am on the IBR for several years now paying the ten percent of my salary as required. I was recently told by Quicken Loans that I cannot have a mortgage because I have to show that I can cover the interest payment on the FULL balance every month. That’s $2700 when my payment is only $579. I feel like I will never be able to own if that is the case 🙁
Hi Eleanor:
This is an update from the last post.
My consolidation IBR is $0 and I am in forbearance (but still making payments on the interest). My servicer gave me a repayment schedule that states I will have to start paying $444.91 and $353.59 on 07/18/16 for my two different loans. This past Saturday, I took this schedule to my lender, and he stated that they can use the $798.50 payment instead of the $0.
Even though the $798.50 payment is not due yet, is it to my advantage to have some type of payment rather than $0? My $0 is from 07/18/15 to 07/18/16.
He also stated that I can possibly be pre-approved sooner than waiting until the end of September for my 6-month employment probation period to be over.
Thank you!
Eleanor – I have over 150,000 in student loans. I am not in repayment, but I do know that my IBR payment would be about 420 a month. Can you recommend a Loan Officer in Illinois – Chicago or Chicago suburbs who is familiar with student loan issues with regard to obtaining a mortgage?
Hi Eleanor,
Thank goodness for your blog! If I lived in NC, I would totally work with you guys! 🙂
I have a question regarding IBR. I currently live in Colorado, I have 100K student debt and recently had the loan servicer to take me out of deferment and start my payments. I am currently paying $175 a month on my loans and it is reflected on my credit report. I am applying for a VA Home loan and it will be after mid September. Do you think I will have any issues getting a mortgage?
so as it stands now, FHA loans only require that a payment be listed on the credit report (doesn’t matter how big or small the payment is)?
Yes Laura – if you have a payment, we are good. It’s when there’s no payment that we run into a problem – so IBR, Deferred or PAYYE loans with zero payment amounts, make it more difficult to get a mortgage.
Ceejay – based upon what you are telling me, you should be fine. If you have questions, you can call me – many people do, and I am truly ready to help. My number is 919 649 5057… just remember that I’m on the East Coast 🙂
CONGRATULATIONS!!! You are going to know how cool it is to walk into a house for the first time after closing and say, “I OWN THAT LIGHT SWITCH!” At least… that’s what we did when we bought our first house! THIS part is not fun, but once it’s yours – man! That makes it all worth it!
Renea – If the lender can qualify you with the fact that the payment will be $798.50, then that is great news. We’ve taken letters to the credit bureau and in some cases, we have been successful in getting the payments updated from zero to the payment that will be in place once the deferment is over. I would keep saving as long as I could… If you are on probation, then yes – in most cases, you will need to wait until that is up.
I just had a guy who worked at a Nuclear Plant get approved without having to wait. He had been working for 5 years, and systematically he had to go on probation for his next job, and was studied to be certain he was healthy. This was a systematic situation – but if your company has a “contract” that says that you must pass a test, or take some training, or work a certain number of hours – then that will normally need to happen before you can close.
DARN! @%*# I thought Quicken knew better than that! I guess that’s good news for me! WOOT WOOT!
I am actually in a Mastermind group with Top Lenders across the country. The names I’ve been giving out are guys who are in the group with me.
So in NY, I’m gong to suggest that you contact my friend Rob Rauf (732) 740-0175 – he knows these rules and will give you the BEST advice on buying a house. Just tell him Eleanor suggested that you call him.
CONGRATULATIONS! It is tough going through all of this – but home ownership is worth the effort, and if you keep that goal in front of you, this can be a reality1
Yes, I am in a Mastermind Group and one of the guys I respect very much has been the President of the Mortgage Bankers in Illinois. I’m sorry you’ve struggled to get your answers, but contact Larry Bettag 630-524-9677, he will be able to give you the best information.
Tell him Eleanor suggested you call.
I know this is a struggle – but I’m so so happy that you are continuing to push forward! Home Ownership is worth the effort!
Eleanor…..first, I value our professional friendship and hold you, obviously, in high esteem. Yes….Virginia…our company is here to serve you in Illinois!
You are awesome Eleanor, thanks so much for your help, I will definitely give you a call! I so wish you guys handled loans in Colorado, I wouldn’t HESTITATE to work with you. I love overachievers. You rock! 🙂
Hi Eleanor…I’ve enjoyed reading your comments about mortgages for first time home buyers. My husband and I are looking to buy an FHA condo in downtown Miami, Florida. Do you have any lender recommendations? Our price range is $250,000 or under and we seem to have a hard time getting the lenders to respond to our questions.
Cheri – my friend Gerry Suarez is a great lender in Florida and has a Team that works with him. Their number is (352) 742-7900. Tell him Eleanor told you to call 🙂
I am still very confused on the whole new FHA loan student loan issue. I have about $170,000 in student loans. I am on the IBR program and pay $380.00 per month . I recently applied for a new home mortgage and the loan officer stated that I needed to find out what my standard payment would be, so that could be calculated into my DTI ratio. Is this accurate? If so, do they expect a decline in the number of home sales since so many people have student loans?
Oh MY! That made me smile…
“Is this accurate? If so, do they expect a decline in the number of home sales since so many people have student loans?”
Yep, WE are expecting this to have a HUGE impact on folks.
OUR company interpretation, is that if the Credit Report indicates that we have A PAYMENT for the debt ONLY with a FHA loan AFTER 9/14 ( so not a $00.00) we are Ok. If the credit report shows $00.00 payment, then we are having to get the payment letter from the Servicer.
USDA Home Loan Underwriters and Conventional Underwriters are taking the stance that you must use the full fixed rate standard payment.
What is stunning is that you spoke with a Lender who is assuming the guidelines have already changed… If you are under contract to buy a house, before 9/14 – we are pulling case numbers, and working under the current rules. Are you in NC???
Maybe you are talking to a loan officer who works at a company that is taking an ultra conservative stance???
Thank you Eleanor for your quick reply! I will call Gerry and let him know that you sent me. It’s so refreshing to get quick, professional responses from a lender. We would definitely use you if you were in Florida.
Eleanor, I just wanted to say thank you for hooking me up with Mr. Rauf for loans in NY. He really knows his stuff and is helping me immensely. THANK YOU, THANK YOU, THANK YOU for your articles and your recommendations.
I know this may sound redundant, but I am not sure I am clear here. We may be doing an FHA mortgage after September 14th. If I am hearing right, if you have an IBR payment (not zero) that this can be counted in the DTI vs the 2%. My wife has high student loans. She has a deferment now, however, she is now considering going from deferment back into IBR with probably a fairly low payment. The servicer is very good with giving a letter and reporting to the credit agencies.
Define “actual payments” for student loans. Is it the actual payment on the credit report (IBP) or is it the actual payment one would pay if they were just on a normal payment plan (not IBP). I have IBP payments on my credit report but have been told they have to use what my payments would be if I wasn’t on the plan. Its jumps from $200 a month to $1200. Cant debt ratio.
Connie – GREAT QUESTION… the answer is… it depends on the Loan Program, and the Lender. Our Company is taking the new FHA guidelines to say that if we have A PAYMENT (not zero) on a FHA loan we use that payment to qualify you. There are lenders who are using the USDA Home Loan guideline “rules” which say that if it is a variable payment (like a IBP) then you must use the fully fixed rate payment. If you are in NC, please call us 919 649 5058
Pat – you are on the right path. If you can show a payment (not zero) and you are applying for a FHA Loan – we will be using the payment, not the 2%. If you are applying for a USDA Loan, they will consider an adjustable payment (IBR, PAYEE, etc) as unacceptable, and will require us to use a percentage of the balance. Not all lenders are going to underwrite to this standard. If you are in NC, call us – this is how we are underwriting these loans. If you are out of our Service area, make sure you are talking to a loan officer who understands FHA, First Time Home Buyer – etc.
We just found out about a new Down Payment Assistance program that works with FHA loans. It comes available next week. Check back, I’ll put the information on the $15,000 forgivable grant on the front page. I mention it, because something like that might also help with folks who have student loan debt, and want to grow some equity. Good Luck!
Eleanor, can you please refer me to a LO in Middletown Delaware area?? I have some loans at 0$ repayment, which is the bulk of my loans 49k and the others I pay 80$ a month. This feels like punishment for seeking further education.
Sheri! SO sorry for the delay! I’ve been in training for the past week!!! John Garofalo his number is (301) 623-1470
Eleanor,
My daughter is having the same issues as many,many people with student loan debts are. Can you recommend a lender in Pensacola, Fl who understands FHA/ student loan debt and can offer assistance in obtaining a mortgage?
My daughter was pre-qualified, offer placed on the house was accepted, went under contract, paid for inspections, etc . only to be told today, her debt ratio was too high due to student loans. She submitted the letter from the lender stating her payments are an amount much lower than the new FHA guideline stipulations. Lender interprets the guidelines differently than your post. She is an accountant/auditor and understands the math but isn’t positive the lender understands the math nor the FHA guidelines.
Please help!
Thank you!
Hi Eleanor,
I just found out that student loans in deferment now count against my DTI (devastating). While I am in deferment all I can get from my loan servicer is an estimate of what my payments will be once they are out of deferment (several fixed levels are available). I sent these estimates to my mortgage company and they told me that they cannot use estimated payments, they can only use actual payments. But, the only way to get an actual payment is to come out of deferral by dropping out of school… Is this accurate? Basically, if I am in deferral they will use 2% ($2200 a month for me) and ignore the estimated Extended Level repayment ($1128) a month? It seems like my only options are to wait 5 years until I graduate or drop out in December and wait the 6 months until my repayment starts…
Can you provide a contact for Southern California? I live in Riverside County.
Eleanor, you are AWESOME! I wish I had found you before we started this whole process.
Some back story first. I have $89k in federal loans (and about $10k in private) with a masters degree and am working full time in the field. I consolidated my student loans back in July, which gave me an IBR payment of $17. I monitor my credit on Credit Karma and it seems that my student loans have been in limbo. The previous loans show $0 balance and the consolidated loan has not appeared.
We are under contract on a home as of 8/31/15 and received underwriting approval (with conditions, just more documentation) on 9/11/15. When our credit was pulled for underwriting approval, only my private loans showed. I explained the discrepancy to our lender. She said that it’s kind of lucky it hasn’t shown on my credit report and we’ll just run with it. She asked for my monthly payment and said since it’s so low, don’t worry about it.
Today Credit Karma is reflecting my huge student loan balance and has dropped my credit score 13 points (which I expected, but it’s still over 700). We are applying for a USDA guaranteed loan with MCC through NC HFA. My stomach is in knots over this. Our lender, I’m assuming, monitors our credit throughout this process. I don’t want to delay closing (set for 10/15). I am able to produce a letter from FedLoan showing the monthly payment amount and repayment term with no mention of it being income based. I am also enrolled in the Public Service Loan Forgiveness program (only 118 payments to go! haha!), which is why I went with IBR in the first place. I want to be prepared to deal with any issues that may arise instead of waiting until we’re at closing. Any advice or reassurance you have would be SO appreciated!
Becky it sounds like you are doing all the right things. If you have any questions, since we are in NC, you can always call us at 919 649 5058
Colleen Craig (661)-310-8536 is who I would recommend in California. Just told her Eleanor gave you her number 🙂
Thanks Eleanor! Do you think they’ll count 1% of my total loan balance as my payment instead of the low IBR payment? Will that documentation suffice? I know rules changed September 14.
Audrey – it appears different lenders are accepting different documentation. I’d suggest trying a different lender. I’m sorry I can’t give you better advice.
Yes, I suggest that she contact Gerry Suarez, 352.516.9884 / he understands the guidelines and can look at her specific situation. I know it can be a hassle, but buying a home is so worth the effort
Becky, if they don’t count your low payment – call a different lender.
I applied for a mortgage July and was assigned an FHA case number. I switched mortgage companies in August when I received a better deal and better service. I was approved by the DU but my file was down-graded to manual underwriting because my student loan debt put my DTI to 49%. My loans are in deferment. I contacted a different lender and was told due to the changes I might be affected by the new FHA student loan counting requirements. Am I grandfathered into the requirements before the Sept. 14th change? Or because I started the process with a new lender will I now be held to the new FHA student loan debt requirements? I am in Georgia.
Do you recommend anyone to work with in Alabama? I have student loans that are about to go into repayment. When they do I plan to enter the IBR repayment plan. I’ve called around and everyone is saying that they will only take 2% or an amortized amount that is not negative. This sounds like an overlay, but since everyone I’ve called is saying the same thing it’s hard to tell.
Hi Eleanor!
Reading your great advice to everyone else gives me hope that I will be able to be a home owner. I lost hope after hearing about FHA changing rules regarding student loans. I currently have $100k. Do you know of anyone in Pennsylvania that is an expert in this situation like yourself?
Hi Eleanor:
So, since my last post, my lender called and told me that because of my student loans, I only qualified for a $50,000 loan, but they still denied me. He stated that a $50,000 house would have been very small anyway. He suggested I get in touch with Habitat for Humanity and I attended a class. The grant home company that I have been dealing with pulled my credit for me, and my student loans are reflecting as closed (due to the consolidation), and are not showing any payments. My credit score is 697. My IBR is $0 until next year’s taxes, but the servicer gave me a payment of $798.50 which would take effect if my AGI and/or family size changes.
Is there any other route I can go to try to get an FHA loan? I really do not want to have to wait for a home to be built with HFH. You gave me John G.’s contact information earlier, but I haven’t gotten in contact with him yet.
Thank you!
I have been reading your reviews and really appreciate the info you are providing, I live in Arizona and also in the same limbo as everyone else regarding the ibr repayment $0.00 program. The mortgage company just informed they can no longer go with the amount was pre qualified for because as of 9/14/15 then ibr regulation kicked in. Eleanor do you have anyone you can refer me to that can help me getting a pre qual with the ibr program being on effect ? because the mortgage company I am working with seams to not know what to do since 9/14/15 passed ?
Hi Eleanor,
My wife and I just applied for FHA/USDA loans last week on Sept. 17, 2015 through a new home builder. We want to build a new home and close in April 2016. Our LO informed us that the laws changed literally the day before we submitted the application and that they must now use 1% of our total outstanding student loan balance or FIXED payments for our student loans when calculating DTI ratios for BOTH FHA and USDA loans. Using FIXED payments our front end DTI is 23% and our back end DTI is 87.5% because we both have a large amount of Federal loans under IBR and I have a small amount of private loans on a rate reduction program. We pay $85 per month in IBR and I pay $292 for my private loans under the the rate reduction program which is similar to IBR in that you have to setup the plan annually, however, the interest rate is lowered so that the interest doesn’t accumulate/capitalize as in the IBR plan so my payments would actually be the same or lower every year for the private loans (although my loan service provider will not state that in writing). Our total student loans obligations amount to $377 not the thousands of dollars reflected under the fixed payment estimates or 1% calculation.
Using our current student loan statements (which doesn’t mention deferment/IBR/Rate Reduction plan) to calculate our DTI our our front end DTI is 23% and our back end DTI is 43%. We have $10,000 we can use for downpayment and/or closing costs and the new home we want to build is $157,000. Our middle credit score is 650 and we have no negatives in our credit report except for our CC utilization rate which we could lower to 30% by closing in April if necessary. Is there no hope of getting a FHA or USDA loan approved under the new rules? Do you know a LO in Texas? Thanks for all your help
Hi Eleanor,
Any good rec’s for Detroit, MI or surrounding? My situation is simple: I currently have north of $150K in student loans and am in an in-school deferment. However, I talked with my student loan provider and am able to opt out of my deferment. The issue with this is that, according to my current lender, underwriting WILL NOT use my IBR payment, ONLY what is on my credit report. I thought, ok fine, I will simply wait for the IBR payment amount to show on my credit report and then begin the process(This is for FHA, by the way). I then spoke with my student loan provider again and they informed me that(I “think” this is how they worded it, I could be wrong) THEY ARE REQUIRED TO SEND OUT THE STANDARD REPAYMENT AMOUNT TO THE CREDIT BUREAUS REGARDLESS OF ANY LOWER AMOUNT I MAY BE PAYING UNDER AN IBR OR EVEN A FIXED PAYMENT PLAN. IF this is the case, I will basically never be able to own. Do you have any insight into this or a good contact in the Detroit, MI area? My current lender states they HAVE to use what is on the credit report, even if I supply written documentation from my student loan provider of my lower, and even possibly, fixed payment. Thanks for ANY suggestions or advice. Great site!!!
Best,
Sean
FHA Case numbers are assigned by borrower and property – and you will likely need to speak with the lender who pulled the FHA Case number. It would have to be re-assigned to whoever is going to be your lender. I would do this quickly, because case numbers can also expire.
Here’s the thing – nobody really knows, because the changes last week DID affect the way a loan runs through DU (The Automated Underwriting System for Fannie Mae). We are seeing a SLIGHTLY easier Underwrite through the Freddie Mac system, so you might want to ask your lender to run the file through LP (the Automated system for Freddie Mac). Files without Student Loans that we ran in late August and are being Underwritten right now are coming back with “quirks” no one anticipated.
Jamey – if you have a student loan payment, and the payment is reflected on the credit report… or you can give the letter to the lender stating what the payment is, and the lender can do a rapid re-score and have the payment added, then you are OK. You should be able to apply for a FHA Mortgage.
I would look for a lender who participates with the Alabama Housing Finance Agency. Because you might qualify for the Mortgage Tax Credit. If you are a first time home buyer – that’s a benefit you don’t want to lose!
I would wait, and once you are out of deferment, apply for the mortgage. There’s too much speculation right now. You are right – someone is quoting you what USDA says the mortgage guidelines are regarding student loans having to be amortized. This change only happened last week.
The Lenders who work with your Finance Housing Authority are the lenders who know how First Time Home Buyer Programs work.
Melanie, I would suggest that you contact Betty Heffner in our Pennsylvania office. She has more experience with First Time Home Buyer programs than most loan officers, and we share the same Underwriters. Her number is (814) 943-1900. Please tell her Eleanor suggested that you call 🙂
WOW! Okay, please call my friend Tom Burris who is a great loan officer in Texas. Tell him Eleanor suggested that you call. His number is 214-763-4629.
I want to be sure that ALL of your student loans have some sort of payment. With several of the folks leaving comments, they have a couple of their loans in some sort of payment plan, but not all. For FHA, you just need A PAYMENT – with USDA Student Loans, they must be a fully amortized payment.
I would again suggest contacting John – if he’s not replying, let me know.
Hello Eleanor,
I’ve spent the past thirty minutes reading this thread; you are a true wealth of knowledge! I, also, have a question regarding my financial situation.
My husband and I are both in severe student loan debt and wonder if we can ever buy a house, ever. We reside in Ohio.
His debt is about $100k. $60k of that is private loans (ugh, I know) and the remainder is federal. He began repayment last February. His monthly school payment (combined) is $600. His monthly net is $3,800 ($72,500 gross annual).
I recently completed my master’s degree, but choose to be unemployed as a stay-at-home mom for the time being rather than pay childcare costs. (It was not any easy decision to make, but that’s a completely different discussion.)
My school loans just went into repayment and they’re all IBR. My monthly responsibility is $145 based on a loan total of $104k, and because I’m unemployed, my husband will be paying that monthly amount (until we figure out childcare so I can work, etc. etc.)
Am I correct in thinking that we’d be denied for an FHA mortgage at this time? Although we’re paying our bills on time (and both have credit scores around 750), there’s hardly any fluid cash left over. We pay $725 in rent and I feel that any house payment (PITI) over that, in our current situation, would be detrimental.
Thank you for your resources and assistance!
Okay, I read through the thread, but would rather just ask my question since I couldn’t find my exact situation. I have made loan student loan payments for two years at $95. We are now under contract on a house and working with a lender. My student loan repayment schedule increased my payments while we are under contract (so I am not sure whether by closing my credit report will actually show the increase). However the increase is not the issue, the increase is only about $30 more. I have a schedule I am going to give my lender because I am not trying to hide the fact they went up. They will be at the $125 rate for two more years then go up again, and again two years after that. Will they count the payment I will be making 6 years from now of $296, or the one I will be paying now for the next 2 years of $ in my DTI?
I applied for the loan before 9/14/15 and have a $0 payment on my student loans due to IBR. Can they count that against me?
If you applied for a FHA loan before the 9/14 date, and the company pulled a case number from FHA before that date, they should be able to underwrite your file based upon the previous guidelines. If you filled out an online application somewhere, and you didn’t actually speak with a loan officer, then no – it probably didn’t work.
Zach – great question! I am in NC, and I can only tell you what OUR company would do. I would send the information you have to the credit bureau and update your report to the current payment amount. (so $30 more) The FHA Guidelines are very clear, they are looking for A PAYMENT – not the fully amortized payment of $296. If you’ve been reading this string you know that apparently not all mortgage companies are doing this. Some Banks are taking the very conservative approach that USDA Home Loans set out last December, and are looking at the fully amortized payment.
If you are in NC – please call us at 919 649 5058
I can help you! Yippee! Our company headquarters are in Ohio. Sorry, but I feel so bad that so many folks are asking questions and I can’t help them.
So, we would make the loan in your husband’s name. Your payments will not be part of the “mix” for qualifying purposes on a FHA Loan. Your Debt to Income Ratios are based upon his gross monthly income of $72,500 divided by 12 / $6041. We will take all of his debts, plus the full house payment and divide that into the $6041 – and hope to have a debt ratio no higher than 45.0%
Depending on where you are buying, we would look to see what Ohio Finance Agency First Time Home Buyer programs you might qualify for. Home ownership might not be the best option for you right now, but we will be glad to talk to you about what your options are. But no, you would not necessarily be denied. 919 649 5058
Hi Eleanor, I am in the process of saving up for a house. I have approximately 125k! In student loan debt, and I make about 104k a year. I am currently paying $538 month under IBR based upon my previous tax returns, as I just got a boast in salary as of this year. My IBR will need to be re certified in July 2016. Of course with my increased income my payments will also go up. The issue is that I am a single parent living in an extremely high cost area. I have the option of putting my loans in forbearance for up to 36 months. Will I still be subjected to factor in my debt to income ratio for an FHA loan, if I utilize this option? I am afraid that if the factor in the 1500 month (which is the projected payment not under IBR), I would not be able to afford to buy anything in my area. Currently my credit report as “0” for repayment options. I believe its due to the IBR payment not being reported yet.
These changes are truly terrible and i wish I had of known about this before hand! I’m currently in law school part-time and have a ton of student loan debt ($200k) and my spouse is also in school full-time (around $35k in loans). All of our loans qualify for IBR. Our estimated IBR payment is $650, but our student loans are deferred for several years. Our lender (NFCU) is using 1% of our balances and is destroying our DTI. We are in the process of “un-deferring” our student loans to enter IBR, but it is a lengthy process.
Do you know of any ways to get an estimated IBR payment or other lenders that can accept something other than 1% when the loans are deferred? This issue needs to be brought up to senior leadership in HUD and to Senator/Representatives. This is a huge deal. Thanks for the post, this is great information.
Could you please send contact information for Las Vegas, NV? I live in Clark County. Thank you.
Congratulations on taking the steps to buy a house! The process might seem a little difficult, but it’s worth it!
I just called and had a conversation with Edward Tilk at Amerifirst. He has tons of experience with First Time Home Buyers and I suggest calling him:
Edward Tilk
NMLS ID# 153842
AmeriFirst Home Mortgage
Phone: 734-692-3333
etilk@amerifirst.com
Yep! I would recommend that you contact Kevin Liske, he’s got a ton of experience with First Time Home Buyers in your area.
Kevin LiskeHomebridge Finance Services
NMLS #1180531
7220 South Cimarron Road
Suite 100
Las Vegas, Nevada 89113
kliske@homebridge.com
O: (702) 763-5828
C: (702) 372-3748
I agree – everyone who reads this should contact their Senators and Representatives to let them know that this is a HUGE problem! The FHA Guidelines now state that we must use 2% of the balance when the payment is Zero (deferred). USDA Home Loan guidelines allow for 1% of the balance, but require that the student loans be in a fully amortized payment plan for us to use the payments to qualify you for a mortgage
Michelle – if you are a Veteran, and you go into Forbearance for 3 years, you are good to go. No payment will be counted against you… if you are not, then FHA will require the lender to count 2% of the balance, assuming you have no payment amount showing.
Denise I wish I could tell you that there are different rules out there – but you will find the same issues everywhere with FHA Loans. The FHA guidelines changed. Now, having said that – my good friend Mike Jones in Tuscon will absolutely give you the best advice about what you can do now… but a zero payment is now a problem for FHA loans. Contact Mike at 888-634-6399 and tell him Eleanor says “HEY!” I love that guy!
I just started saving for a home. I live in Maryland. My IBR payments are $0 for 12 months. I have over $300,000 in student loan debt. This is so depressing. I want to buy a house but it looks like I dont even have a chance. Any advice? If they use 1-2% for a payment, i will not qualify due to DTI. So am I just suppose to rent for the rest of my life?!? I really dont know what to do. Any advice would be greatly appreciated.
It seems I have the same or similar situation as several people. I have almost 100 in student loan debt, all on IBR. They are with 2 different lenders. I have payments of $60/mo with one lender and $0/mo with the other. I just applied for the USDA mortgage rural development loan standard and am being told that for my dti ratio they will use the standard repayment calculation which would total $704/mo. I have about $5000 cash available for any costs associated with buying a home. I feel like I’m in an impossible situation. For personal reason I have to move and cannot afford to rent in a place that would be safe for my kids. I had thought that the rural development loans were for lower income families. My credit score hovers around 720, I never anticipated that a monthly payment amount that I will never pay would prevent a mortgage loan. I would appreciate it if you could try to assist me by answering some questions? 1) would it matter if I applied for the direct rural development loan? It has more restrictions but, working within them is better than nothing. 2) would an FHA loan be reasonable under my current finances? I currently make $36k anually. 3) Would I qualify for first time home buyer consideration if I had my name on my mother’s home mortgage for a few years. She refinanced and needed to show additional income. My name is now off of her mortgage. 4) I’m in Tulsa OK are there recommendations for someone to work with here? I’m a single mom & I don’t have anyone familiar with this process to guide me. The loan officer I have dealt with so far was extremely condescending and unpleasant. Thank you in advance for the information.
Guidelines now state that we must use 2% of the balance when the payment is Zero (deferred) but what if you have a zero payment, but your loan is not in deferment? I’m currently in a public service forgiveness program where my payment of zero actually counts as a payment- and after 120 payments my loans are forgiven.
Linda – CALL YOUR CONGRESS REPRESENTATIVE! We have so many of these situations, were Nurses, as another example, or Teachers have their student loans forgiven. Currently there are no provisions for you. However, Freddie Mac offers a 3% down payment program that only counts 1% of the balance – we are seeing more people use this as a better option to FHA
I’m sorry you are having this trouble – but Yes… USDA wants a fixed payment, and although I don’t do Direct USDA Loans, I believe it is the same for Direct or Guaranteed.
Freddie Mac has a 3% down payment mortgage loan that only requires us to count 1% of Student Loan Debt.
I suggest that you contact one of these guys in Oklahoma. These are the folks who should be the most familiar with First Time Home Buyer Programs. GOOD LUCK!
Chrissy – could we count 1% of the balance, and get a non – occupying co-borrower?? Freddie Mac offers this program. You can call our Office for more information 919 649 5058. We lend in Maryland
Thank you so much for this post. I am still confused however. I previously qualified for a loan in Feb. of this year, but took too long to find something, and now I am finding myself in a whole new situation with the FHA loan etc… So my situation is this: I live in MD and want to purchase in MD. I have 6 figures in student loans, and I am also currently in graduate school, my loans are stating that they are in deferment until 2021 (although I will be done with school well before then). I previously had consolidated my undergraduate loans and was making payments on them so there are payments showing on my credit report. Then I chose to go back to school and added on more loans, which do not have payments showing on my credit report. Now my loan officer is telling me that I have to show something from the student loan service showing what my estimated payments would be – but the student loan service tells me that my estimated payments would be $900+ under the standard plan. I asked to be moved to IBR which would be much less, but they said they can’t even start that process unless I drop our of school or finish school and consolidate my loans once again. I am so confused on what my situation is. Can I borrow or not? My loan officer isn’t calling me back so I’m left confused. and the 1% that is mentioned in this article, is that 1% per year or month? I’m so lost, I just want a house.
Unfortunately, you are in a difficult spot. If you owe $125,000 in student debt, and they are counting 1% of the balance as a payment, that’s $1250 a month. For Freddie Mac Loans, that is what they count on a Zero payment due, deferred student loan- 1%
Is it true that you can NOT owe a $0 payment? Example – my student loans are currently deferred until 2019. However, I applied for the IBR for my student loans and it said I owe $0 as my monthly student loan plan. I was told by the Lender that if it shows $0 repayment then they would STILL have to use the 2% rule for my DTI, which puts me OVER the DTI ratio and have my loan denied. smh I am so upset because beyond this I qualified for a home. How can I get around this? Should I call my student loan lender and request they put an amount higher then $0 that I owe? Is that even true?
Unfortunately- the lender is correct. HOWEVER Freddie Mac allows for us to only count 1% of the Balance.
Thank you for all the knowledge. I am hoping that you can help me out. I opened a FHA case number and application on 9/3/15 to refinance my home. At the time, my IBR payment was zero and I had to renew it for 10/15/15 and as of this month, my new IBR payment is $107 a month (I paid this on 10/3/15).
I was approved for my refinance: I signed my disclosure forms, sent in all my paperwork, passed the appraisal (after shelling out $800) and then, all of the sudden, I was told my refinance could not go through because of my DTI. The company I am working with has told me 1) they must use 1% of my loan balance 2) they must use 2% of my loan balance and 3) they CANNOT count my $107 payment as it does NOT cover interest on my massive loan debt (I’m in education with two master degrees and post-master graduate work– and part of public loan forgiveness). Then, they said that they can use what they calculate to be an interest only payment; so I thought things were fine, but the documents moved up the ladder and as of today they said they cannot use interest only payments. Yes, they have told me many different things about my student loan payment.
Can you please help me out? I live in Pittsburgh, PA. From what I read (including the HUD manual) it seems that with regulations prior to 9/14/15 and after 9/14/15 that my actual payment of only $107 should be counted toward DTI, BUT my $107 payment has not yet reported to the credit bureau as this is my first actual payment of more than $0 (and FedLoans will not report it until they do their monthly report).
I’m so confused. If my refinance does not go through, I was told I am responsible to the appraisal fee AND the close to $800 in items I had to fix (retaining wall in driveway) to pass my appraisal. My home appraised for $60,000 more than what I paid for it seven years ago as I bought a fixer upper in a great and up and coming neighborhood and thus far, I have only remodeled the bathroom. The money from the refinance is going to be used to remodel the rest of my house and also to help (hopefully) invest in a rental property.
I appreciate any help and insight.
I’m so sorry that you are getting so many different answers. It could be that the Mortgage Lender is trying to send your loan to a variety of different banks, and those banks are quoting the Mortgage company different sets of Overlays. We are finding that different companies are adding these overlays for risk protection purposes.
I don’t have your file, so I can’t speak to all of the twists and turns that could be involved with your refinance… however, it might be possible that the case number and the appraisal can be transferred. You might want to call our loan officer in Pennsylvania – please tell her that Eleanor suggested you call. Good Luck!
Betty Heffner
304 Frankstown Road
Altoona, PA 16602
PH: (814) 943-1900
Hello Eleanor. My husband and I are in the process of (hopefully soon) being fully approved for an FHA loan here in Texas. My husband went to law school and I went to graduate and medical school before deciding to leave and become a teacher. So needless to say we have a great deal of debt (6 figures a piece). We both recently consolidated our federal student loans. Before the consolidation I was on IBR and my husband’s loans were in deferment. We both reapplied for IBR along with the consolidation and both qualified. We’ve sent documentation to our lender of this but we were still denied by the underwriter because they said our DTI was to high. Apparently our credit reports are showing astronomically high payments and not our IBR payments ( 61/month and 26/month respectively). We sent verification letters to them today from our lender and our loan officer said he will get back to us quickly. Is he just not telling us that 2% of our loan amount is being calculated in our DTI? Do I just need to give them additional time to verify our payments? They already had us conference call with our lenders who then verified our payment amounts….but we were still denied. I am worried that the 2% is being counted and not our actual payments. What should we do? Thank you in advance!
Samantha – some companies are on a very long wait time to have conditions reviewed. We worked at a company earlier this year that took 9 days to review documents in Underwriting. My guess is that your mortgage loan officer is being straight up about what they are doing. You can ask them for a copy of your updated credit report with the new payments, and do the calculations yourself? Maybe that would make you more comfortable? You are certainly entitled to a copy of the report, we always give one to borrowers, it’s part of the service we offer. It makes it easier for us to all be on the same page 🙂 GOOD LUCK!
So I’m in IL, but I’m currently in the process of trying to purchase my first home. Recently, my loan officer called me and told me that I could not have any loans in deferment and that I needed to take all of the loans out deferment and start paying on them immediately. Can you tell me why? From everything I’ve read, normally your loans should stay in deferment, even though they’re counted against you (which is fine!). I currently work full time, making $30,000 and am a current full-time Graduate student.
I want to provide a little hope for people feeling discouraged by all the doom and gloom you find on the internet about qualifying for a home with student loan debt. I am here to tell you IT CAN BE DONE! I have 90k student loan debt and we managed to get a USDA guaranteed 0% down mortgage.
My best advice is to build an outstanding team filled with people determined to make your dream a reality. This includes your realtor, lender/mortgage broker, family, friends, anyone! If someone brings a negative vibe, do not let them in your circle! If your lender says it can’t be done, call different lenders until you can find someone who says YES, we will help, no matter what it takes. We had luck with a private mortgage lender that is not a bank. They were much more flexible. In the most stressful times, the assurance that everyone involved WANTS this to work out for you is invaluable.
Also, be realistic. You can’t expect the house of your dreams with 200k in student loan debt and little income. Be willing to get creative. Do your research and find alternatives. If your lender wants you to show fixed payments for a year, consider drastically reducing your living expenses and doing that for one year until you qualify. Then get back on IBR.
Eleanor, you are an absolute gift in this process. Please keep doing what you’re doing. This comment thread alone helped my stress level exponentially!
Kelsey – I’m not sure why the loan officer told you that. You are right, it’s fine for them to remain in Deferment as long as you qualify with the payment counted against you.
Hi! I’ve been threading through your thread and really feel you may be able to guide me in the right direction.
We’ve been constructing our home and now with just a few days before closing have been told that we must use 1% of my total balance of student loans which is now putting us above the acceptable ratio. This had not been an issue before since my payments are based on IBR and payments are reflected on credit report as such. Is there any work around to this? We went from a $114/payment to the assumed 1% around $1250 completely sending our ratio in a tailspin. Not sure what we can do given that this is a new construction rather and existing. We were originally approved for our loan based on 90ltv, conventional 30 yr fixed. Would appreciate any suggestions you may have on how we can possibly use what is noted on our credit report rather than the 1%. Not the loan amount exceeds what would be acceptable via FHA therefore been told it’s not an option.
Thank you!
I am currently in escrow and I am near closing, BUT, I have come across a road block regarding my student loans. I am currently in Grad School, and have student loans that are in school deferment. I have established IBR payments for my IBR, but can not establish a IBR payment for my current loans because I am in school and the loans are in “In school deferment,” status. My lenders are holding the actual payment amount against my DTI. Is this proper policy, or is there any way that they could accept the estimate for IBR on the in school loans?
Eleanor, I currently have 150k in student loan debt that is in IBR with a monthly payment of $300. The loans are due to be re-certified in November and I expect the payment to remain at $300 for the next 12 months. Also, I work in public service and the loans will be forgiven completely in 8 more years. Given my moderate salary, there is no way I would qualify for a mortgage if 1% or 2% of my student loan balance was used to calculate my DTI. Does that mean that FHA is the only program available to me? I would rather not use FHA because I have a 20% down payment and FHA MIP is pretty expensive. Are there any conventional loan programs that count the payment on your credit report rather than a percentage of the loan balance? I live in New Hampshire, if that makes a difference. Thank you for your help!
I was supposed to be closing on a house TODAY and only last Thursday received word that my USDA loan was turned down because of approximately $92,000 in student loan debt. I work for a university in the state of South Carolina. My income is $36,000/year and besides a $2,300 balance on one credit card, I have no other debt. I am an Ed.S. student and my loans are not in repayment and I have never set up a repayment plan. The house I was to purchase was $156,000. I called and spoke with my credit union and everyone else I could think of to see if there was any possible way to be approved for a mortgage. Apparently FHA, USDA, and conventional loans are no longer options for me. My FICO score is around 730. I see absolutely no hope unless I am missing something.
Thank you for this site, I only wish I had found it before 9/15/15.
Best,
JJD
can you recommend someone in CT I can work with who will help me get a mortgage with IBR?
I’m very sorry that your loan officer was not familiar with the rules for IBR. I have talked to several very respected lenders who tel em that their company is underwriting FHA IBR payments the same way they are looking at USDA loans, meaning they are requiring a fixed rate repayment plan.
Liz – unfortunately, FHA is your best option. I understand not wanting to be further penalized with the FHA PMI, however… you get to buy a house! The only other option is to do a Freddie Mac, Non owner Occupied loan. Freddie is only looking for a 1% Student Loan debt – and perhaps adding a co-borrower will help with your ratios?
Chris, unfortunately, we can not estimate. They will need an actual payment confirmed.
Aida – I’m so sorry for the delay in responding – we moved our offices, and I’ve been knee deep in boxes!
My best suggestion is to see if a Freddie Mac non-owner occupied co-borrower would work. If you are n NC, please call us at 919 649 5058
Thank you for your response, Eleanor. Do you know of any other options as far as financing is concerned?
First off, I just wanted to say that this thread has been invaluable in our search for a mortgage and a new home!
Ok, we were pre-approved for an FHA loan before 9/15/2015 through our bank. Our mortgage loan officer seemed to be pretty knowledgeable of the student loan dilemma but had no real solutions for us. He wanted to get us at least pre-approved so we could start looking for houses but after reading this thread I’m positive we would not make it to closing w/ this pre-approval. My IBR payment right now is $0.
What I want to stress is for those of us who are repaying under the Public Service Loan option is DON’T “go off” of the IBR repayment plan as others are suggesting (even for a short period). If we go off the IBR, then any of that time we are not repaying under IBR, that time does not count towards PSL forgiveness. Only payments that are made while under the IBR plan are eligible…..so whatever time you are NOT on the IBR plan will not count towards your eligible months under PSL. It seems like those of us doing public service work are getting doubly screwed.
Our option has been to increase income just enough to get a payment under IBR. I’m just not sure how quickly a payment would show up after increasing income and requesting an update on the IBR repayment.
Eleanor, do you know any other loan officers that may have more insight into this in my area? We are in Toledo, Ohio.
Thanks!
You are a wealth of knowledge- and I had no idea that was an issue! Thanks so much!
Our home office is near Columbus. The person I would refer you to is in that office, his name is Derek Good. Derek’s number is (740) 349-7082. I would suggest looking at a Freddie Mac Non-Owner Occupied Co-borrower, as the Student Loan Debt is only counted at 1%? Good Luck!
Lisa – the IBR deferred payments are going to be a problem, no matter who you talk to. Unfortunately, you can no longer buy a house with payments in deferment. My friend Rob Rauf might be able to help you – let him know I referred you… his number is (732) 557-6920 Ext. 102
I have an update to my situation:
I know I just said not to go off the IBR repayment plan if you are in a Public Service Loan forgiveness program – but I just calculated what my payments would be if I were to change my income based repayment plan to an ICR (income contingent repayment plan) and instead of being $0/month payment, my payments would be $165. Currently, if you are making payments under an income based repayment plan and in the PSL forgiveness program, it doesn’t matter WHICH repayment plan you are enrolled in, so long as it is one of them (IBR, pay as you earn or ICR). The IBR calculates what your payments would be based on 10% of your discretionary income; the pay as you go uses only 10% of your income as well; BUT the ICR goes by EITHER 20% of discretionary income or what your standard payment would be over the course of 12 years). So for those who have a payment of $0 but can afford to make some kind of monthly payment – it may make sense to just switch which type of repayment plan you are on.
Obviously this is my own personal situation (about $52,000 in student loans) and about $30,000/yr. income and 3 people in home. This may be an option for someone like me who can afford to make some kind of student loan payment but under IBR doesn’t make enough to garner anything more than a $0/month payment. I could switch back to IBR after being on ICR just enough time to get qualified for a home loan and purchase a home.
I hope this makes sense but I have been really researching this a lot so that I at least know my options and what is realistic.
Thx. My mortgage broker said I qualify for fha with a payment of $0
Unfortunately, I don’t – we all (and I mean ALL) need to contact our elected officials in Washington and let them know this is a PROBLEM
The reality is this is going to take legislative action in order to fix. It will happen, it’s just a matter of when. I have been following this as well as the legislative actions surrounding IBR. We are currently waiting for the Reauthorization of the higher education act via congress. But, there are even talks of having IBR as the ONLY repayment option going forward in the near future. In other words there would be NO fixed payment plans. If you follow Lamar Alexander who is basically in charge of the reauthorization, he just shot down and blocked Perkins loans extensions, why? Because they do not have the option of IBR. IBR is the future, not fixed repayment plans. The mortgage lenders need to get out in front of this ASAP, before an entire generation of people are shut out of the housing market until legislation is passed. Everybody needs to get on board now! Realtors will be having a hard time selling, when the millenials are unable to buy anything. I as a health care provider with a doctor level education, have to have my parents buy me a house, do you know how ridiculous that is?
Wise! I agree!!!
Hi Ms. Eleanor, hope all is well. I am trying to buy a house and like many others I’ve read concerning student loans, am having a hard time getting FHA approval because my loans are listed individually on the credit report and they want a payment for each individual loan. I tried everything I know and the loan company has been really trying to help me as well. The only thing I could think of was to try to consolidate all the loans into one loan which takes some time. Is there anything else I can do, or should I try another type of loan other than FHA. My credit score is only in mid 600 and I have about 200 thousand in loans and writing my dissertation now so I won’t be through until fall of 2016. Thank you for all your help and Blessings through out this season.
I have been reading through most of these and I think your advice is outstanding! I am obviously doing some digging myself to be better prepared for the mortgage I am applying for next year and have a question for you. I unfortunately attempted school a couple times when I was younger and when I was no longer enrolled I did not put my loans into forbearance so the 8 ( yes frickin 8 different loans) kept dinging my credit report every month and just completely ruined my credit. I managed to get most of everything cleared up with my credit other than a few hospital bills and of course these loans.
The loans have been in the state of IBR for $0.00 for about 6 months now and from my understanding if I were to try to get pre-approved for the USDA at this current moment they would see it as $100 debt for every loan [$800/m] unless I provide documentation. My question is if I were to consolidate them into one loan and put into IBR would it be seen as only 1 loan ($100) DTI ratio? I have 8 months until this lease is up and hope to be squared away within 3 months of its expiration. We just moved to Florida from Indiana and absolutely love it! I made note of your personal contact for the state as Florida as well. Thank you and plan to Gerry Suarez at 352.516.9884 tomorrow 😀 Thanks in advance!
Hi Eleanor,
So just to make sure that I have this all correct…I should take my student loans out of deferment, arrange a payment (above $0) for my IBR plan, and FHA (and lenders who are paying attention) will accept that payment for DTI, even though that number might change next year?
Is there a particular amount of time that an individual needs to be making these payments for them to count, or a substantial amount of time that it might take for them to reflect on my credit report? I am trying to buy a house at the beginning of next year, and just wondered if I should expect a delay in reporting, or need to be making payments for a set number of months before diving in?
Thanks for all of your valuable information! While some of it has been extremely deflating, I cannot tell you how much I appreciate going into this process well-informed! Trust me when I say that I wish I lived in NC, because I know exactly who I would be calling for my loan!
I think you have been asked this similar question a million times but I am so confused and finding all kinds of conflicting information on the internet as this is a new change. My current IBR payment is $0 however i am up for renewal and the estimate of my new IBR is $106. Will they count the $106 as my payment if i am looking for FHA loan?
Also, I live in Ohio, could your office help me with getting a FHA loan with the IBR payment?
Ashley – yes, we can help you with a loan in Ohio!
We have to get a letter from the Servicer, and have that information added to your credit report. We just did this for a borrower in Asheville, NC. Her loan is coming out of deferment on Dec 15th. It’s now November. It shows on the Credit Report now as being in Deferment. We will have to wait until it’s OUT of deferment to have a payment show up on the credit report. . I’m gusing that will be the case for you too.
GREAT QUESTION Buffy. You’ve got it right. Here’s the hat trick. OUR company, and the companies and contacts I’ve listed here all treat the fact that it’s A PAYMENT above Zero as the guideline. After all, that’s the way the FHA Guidelines for Deferred Student Loans its been written!
However, some companies, including Quicken Loans and Movement Mortgage do NOT look at A PAYMENT. They are requiring FIXED Payment.
So, my advice is to call ME if you are in NC (shameless plug) or at least ASK the lender how it will be viewed before making loan application.
Josh – you are likely better to go with FHA, and take the loans out of deferment. I say this because USDA changed their guidelines last December, and they are counting 1% of the balance, not $100. Gerry can set you n the right path.
Rose – I’m glad you asked. That’s a lot of Education!! FHA is likely the most lenient way to go, because Freddie Mac requires at least a 660 score, and they are going to count 1% of the balance, or in your case, $2000. The other thing you might try (so that you don’t have to wait 12 more months when loans come out of deferment) would be to add a non-owner occupying co-borrower.
Your mortgage loan officer is going to be calling you back with bad news in the not too distant future. Be careful not to waste appraisal and due diligence money!!!!! Unfortunately, they are wrong.
Laura this is a HUGE help! THANKS SO much for adding this information!!!
I too am affected by the IBR payment situation. I’m planning on re-applying for a mortgage in mid-February. I initially applied this summer, but was 4 points shy of the required credit score- and that’s after paying off a $3200 debt. I decided to wait in order to give myself time to pay off more debt, so I wouldn’t find myself in the same situation. Then, as my “luck” would have it, here comes the new FHA guidelines regarding IBR payments. But moving right along…
You mentioned that Quicken Loans and Movement Mortgage both require a fixed payment. Are there others that you’re aware of that require this? Just wondering who I should avoid when that time comes.
This site has been a wealth of information!!!
We understand Eagle Mortgage does too. If you are n NC, please give us a call! Congratulations!!
Hi Eleanor,
I live in Houston and was just denied a loan because of my student loan amount of $560 per month. I make around 74,000 a year and have no debt, but because I wrote off so much last year on my taxes, because I sale real estate part time, they used my actual income I reported and not my income from my check stub which shows the yearly amount I make. Is there any way around this?
I am trying to close on a conventional ihda loan December 1st. Underwriting just came back with questions. My student loan debt is like 160,000. I make about 62000. I was able to get a letter for my private saying my payments go into fixed in June so my broker thinks that solves that issue. However how do my ibr payments take into account? I pay about 400 total for all federal (split between two lenders) under ibr. Will they use that or will they use the 1 percent? Thanks
Hi. I have actually been approved for an FHA mortgage. I really wanted to go the USDA route. I have about $70K in student loan debt. I have read (in this thread) where others who have about the same student loan debt as me have been approved for a USDA loan. I do not have any other debt except for a credit card that I pay off every month and of course the IBR of $10.15 per month. My question is why are some people getting approved for USDA while others are being denied? Is it the mortgage/ lending company? I work for the state of Alabama, and there is a fixed pay plan/ salary schedule for each job classification so the pay raises are no mystery, which means that changes in the IBR (for me) will not be drastic and can in fact be estimated based on the raise I will receive next year. So, if my raises are detailed at least for the next 10 years, and my IBR will not drastically change, then why can’t the $10.15 be counted as THE payment for USDA instead of the 1%? Gosh I hope that makes sense.
Talisha – I understand your frustration. USDA Home Loans changed their guidelines late last year regarding how they treat Student Loan Debt.
Catie – it’s going to depend on the lender. Every lender is looking at this differently. Good Luck!
Catie – it’s going to depend on the lender. Every lender is looking at this differently. Good Luck!
Rachele – we are required by law now to document income. In documenting that, if you write off income, we can not count it in qualifying you.
Hello again, Eleanor!
So, after losing $800 on the house we were previously trying to purchase–see Oct.26 comment–(inspection/appraisal, thankfully we were able to get our earnest money back), I have called to get my student loans into repayment. I have found a different property that I believe would qualify for USDA financing. My annual salary is $36,000 and my current student loan payment is about $550 (without IBR, although the student loan servicer strongly suggested that I go to IBR). With the student loan payment and 1 credit card with a $1,700 balance and no other debt, in your opinion would my DTI be reasonable for a home purchase of $135,000? Also, do you work with buyers in SC? If not, do you know someone that does? Thank you again for all you are doing! I am very passionate about my work and it is always nice to others who are the same even if in completely different industries. 🙂
Best,
Judy
Hi Eleanor. I am so glad to have stumbled upon this thread. I am in Ohio and I work for a large regional bank. I recently spoke with our local MLO about applying for a home loan but she told me that because of my student loan’s effects on my DTI that I have no chance. Between my fiance and I we have a combined student loan debt of around 190k (multiple graduate degrees), but our combined income and family size made IBR the best choice for both of us so we both have the zero dollar payment. We are able to put down 20% (possibly more) on a home and were looking at an FHA loan. Adding to the IBR/DTI issue, I make more and have better credit but carry the majority of the student loan debt. Is there anyone I can talk to about how to get qualified? Our MLO left me feeling pretty hopeless. Thank you in advance for any suggestions!
I am currently on IBR with a 0 payment. My loans were just consolidated in November, and the new consolidation loans are not yet showing up on my credit report at all. Will the underwriter allow my home loan to close while there are no outstanding student loans shown on my report, even though the consolidated loans show a refinanced or transferred status? So far they haven’t mentioned it, and I told them about the consolidation when I first began the peeapproval process. They have made no mention of it since then.
Also, if the loans were to show up on my report with $0 payments but showing as in repayment, not deferred would they go by a percentage of my loan balance for sure or does it vary by lender? They didn’t seem at all concerned about it when we talked about my student debt early on. Its a conventional mortgage through Nova home loans.
Also, if I were to figure out a way to increase my payments to like $50 a month would that fix the issue, if there is one? I think if I switched to ICR it might go up a bit from $0.
Thanks!
A zero dollar IBR payment amount is not a deferment. That’s the actual payment amount required based on the applicant’s income and student loan debt ratio. In fact, if a student loan borrower is receiving social security disability benefits that are untaxed, the untaxed SS benefits don’t even count as income under the IBR plan.
The problem here with the credit bureaus reporting no payment info for the IBR plans that have a zero dollar payment amount each month, lies directly with the way the credit bureaus show the reported amount. The loan servicers do report the payment amount as $0.00, but the credit reporting companies don’t reflect that as a payment. They report it as $—. And that’s not a number like $0.00. But I know for a fact that the servicers are reporting the actual payment amt as $0.00 for these IBR plans that have a $0.00 monthly payment.
Again, ****referring to these $0.00 monthly payment amounts under IBR as “DEFERRED IBR STUDENT LOANS” is not accurate at all.**** Deferred loans are not even eligible for IBR payment plans until they come out of deferment.
I appreciate the fact that we are talking semantics here… but for purposes of a mortgage payment, even if your payment is a $00.00 payment – it will not count for qualification purposes.
There’s a credit report pulled right before closing. If things don’t show up on one report, they are likely to show up on the other.
As discussed, we have several loan officers in Ohio that can help you.
Hi Eleanor,
Are there any updates or any talks of USDA/FHA revising these new guidelines considering that IBR is the future of student loan repayment? I’m sure these new changes are making a huge impact on potential borrowers with student loan debt.
Hi Eleanor,
I appreciate all the good info here. I recently applied for a home loan and was also denied like so many others have stated due to my IBR payment plan of $0.00. I asked my loan originator before applying if I would run into any issues with my student loans and I let her know that I was currently on the IBR plan and payments were $0.00. She said no I wouldn’t have any problems and they can definitely use IBR payment plans. Well she emailed me yesterday stating that the underwriters couldn’t use the $0.00 payment, but they can use IBR payment plans they just have to have a fixed payment and term. I’m completely confused about this and I also don’t understand why the loan originator would tell me that my IBR payment plan of $0.00 would be ok and I wouldn’t run into any issues. I’m very upset about this because I feel the loan originator was not honest with me.
This loan originator hasn’t been very helpful and she hasn’t even given me any kind of advice on what I can do. Yesterday I started the loan consolidation process and once I complete the process I intend to have a payment of $70.00 per month. Will this new payment work to get me approved? Owning my own home would be a dream come true! I’m expecting my second baby next July and I really want to bring my new baby home to a home that we own. This denial has really stressed mw out because I have a credit score of 780 (and I’ve worked hard to get it there), perfect rental history for 9 years and pay all of my bills on time, I just knew I would get approved, but I didn’t and now I’m stressed to the point where my stomach is upset. I know it’s not good for the baby so I have to get something figured out, I don’t want to give up.
I applied at a credit union, so I don’t know if that makes a difference. Any advice would be appreciated…. and do you have anyone that you could refer me to, I live in Dayton, Ohio?
Hi!
Eleanor Thank you for doing this! I have a question, I am also IBR, and need it to qualify for PSLF.
I have been talking to the fedloan people about the qualification issues and the last customer service rep suggested Income Contingent Payment. Which qualifies for the PSLF and will pass FHA. Is this true, because I was denied in June because of the IBR being variable and then the new rules started so at this point I feel like I am in literal debtors prison.
Happy Holidays and thank you!
Kara Papa
I really appreciate this forum and thread. We have been preapproved for a 215k mortgage with one lender but decided to check with Quicken to see if the costs would be any lower. Quicken said we could not qualify because of a total student loan debt of aprox 70k and with our current IBR amount only being around $80 per month, they would have to use 1% of the total student debt for DTI calculations. The 70k consists of multiple loans but each of them shows a small payment amount on the credit report. Their decision made me question whether or not the other lender’s preapproval that went through DU would hold up or are we in for a disastrous surprise right before closing. I questioned my LO and he said as long as we have a payment shown, we are good to go. I want to believe him but still a little nervous having received such conflicting information. Credit score and income verification is not a problem and with using the IBR amount we are well within DTI guidelines. Based on the information I have provided do you see any reason for me to be concerned?
Unfortunately Quicken Loans do not offer the full spectrum of First Time Home Buyer loans. For instance they don’t offer Mortgage Tax Credits or FHA Loans Based upon the way WE qualify buyers, you should be fine! Call us if we can help 919 649 5058
We believe that if you have A PAYMENT showing it should work. If we can help you please give us a call at 919 649 5058
Brittney – my suggestion is to look at the HOUSING AND FINANCE Agency Site for your state. So if you are in Illinois, that would be the Illinois Housing and Finance Agency. On that site, there will be a list of approved lenders by area. CALL the lenders on that list. Ask them if they require A PAYMENT on a FHA loan with deferred Student Loans, of if they require a fixed loan payment
Unfortunately large companies like Quicken Loans (and Wells Fargo) have cut back on their FHA programs – many lenders are using “Overlays.” I believe that if you go down the list of lenders you will find ONE that can do what we are talking about here. If you are in NC, please call us at 919 649 5058. All of your hard work will pay off!!! Don’t give up!!
Karen – no I’v heard nothing about making this easier. I do believe that if every person who leaves a comment here would contact their re in Washington it would be helpful.
We are in debtors prison. Write to your congress people.
It is the only way!
Any recommendations for the Baton Rouge area?
I stumbled upon this thread as I was concerned if my student loans would hinder my getting a mortgage or not. I live in VA, not NC so I’m not sure how different things are. I was a silly college kid that took out way more student loans than I needed to, now totaling $90k. Fortunately, I work for the federal government and it’s a stable job which I see myself at until I retire if I wanted to, so I fall under the loan forgiveness program of loans being ‘forgiven’ after 10 years. I’ve been working with them for 2 years so 8 years left to go.
Currently I have $0 in credit card debt. My car loan payments of $363 per month will be finished this Feb 2016. I am under the IBR plan so I pay $323 per month on that and $122 a month on another private loan. Besides that I have no other debt. I currently make around $58k a year before taxes. I pay $1475 a month on the house I’m renting now but I’m fed up of renting and want to buy a house for the first time in my life. I don’t know what kind of credits are still available for new home buyers. I remember many years ago there were a lot of credits. I might also qualify for navy federal credit union loan although I’m not sure if they allow all federal civilians to get approved. The problem is I don’t have a lot of savings yet, so I won’t be able to put much of a down payment. Is this usually a problem?
And to tack on to a few other people who wrote, since my IBR payments is of $323 a month right now for the next 12 months, does that mean they will use the $323 as guidance for my DTI or are they going to do the 1% of my total balance? Because that will be an additional $900 a month which would completely wreck me. I have to submit my income statement every november to update my income with them if it changed.
Thanks and Happy New Year!
Eleanor, do you have a recommended lender in or around Tupelo, Ms that can help with the IBR issue?
I’m currently on an IBR set at $0/mo and have about $41,000 in student loan debt. I have excellent credit but keep getting told my dti is too high and I don’t qualify for enough of loan to purchase something I’d actually want to live in. I’m just wondering if you might know of any loopholes, special programs, or people in my area that have knowledge on the subject and may be able to help. I live in Iowa.
Me and my wife are in deferment. Hers comes out in July and mine comes out in August. IBR repayment would put us at $692 combined, and standard (extended) fixed would put us at about $1670 combined. 1% puts us at $2825 and out of luck unless we can find an 80k house. Do you know someone that can help us qualify with the IBR in North Texas? We’re wondering should we go ahead and enter repayment early under IBR to have that payment show on our reports.
Hello, My husband and I want to purchase our first home but are panicking a little. He has $66k in student loan debt (that is what today’s payoff would be) and just began paying those. The payment each month is $770. He did default on them a few time as well as deferred and forbeared them when he first had to start paying back a few years ago. He is now paying his monthly loans but we are concerned on how this will be viewed when we try to get a mortgage loan. If he pays the minimum $770 for the life of the loan, it ends up being around $144 thousand. Will we be judged for a mortgage by the monthly payment amount or the $144,000.00? We have no other debt besides my car lease each month and together make around $115,000.00.
Marie – as long as he’s made at least 6 months of payments on time, we will count the $770 a month. Good Luck!!!
You can call my friend Tom Burris, he’s a great Texas Loan Officer and he can help. His number is 214-763-4629
Michelle you will need to get an actual IBR Student Loan payment amount (not $0) or you will be qualified at a percentage of the balance. The % that is used to qualify you will be based upon the mortgage program you are applying for.
Tiffany, I’m sorry I don’t know a lender in Mississippi…
We can do loans in Virginia – and so yes, it’s the same guidelines there that are in NC. We will use the $323 to qualify you. Realize that Wells Fargo, BB&T and Quicken (I’m sure there are others, Movement Mortgage for instance) will only qualify you at the fully amortized payment.
Yes! Tom Burris now lives in Louisiana. His number is 214-763-4629
In response to the answer to VA’s question:
Does this mean there are banks who will take an IBR for a mortgage? Or should we go with a sub level mortgage?
As long as the payment is not ZERO – then we can take an IBR payment. We just closed a loan for a borrower who owes over $160,000 in Student Loan debt and her totals payments were less than $228 a month.
Hi Eleanor,
I just wanted to pop in and thank you, not only for your response to my question, but for consistently (and patiently) answering so many people’s questions on this matter. Since I first read this thread, I have tried to conceive of a way that I could pen a letter to each of my State’s reps, and to the current presidential candidates that would fully address how this change is undermining the benefits of IBR, PAYE, etc. and undermining a huge percentage of the population’s ability to secure a mortgage loan. Unfortunately, I am not certain that I can actually concisely express the harms these new guidelines are doing to future homebuyers and to the market. If you ever find the time, or have the inclination to draft such a letter, one that we could all then forward to these individuals…I promise you that I would most certainly be willing to spread it far and wide!!
Thanks again, Eleanor! Be assured that your guidance has been absolutely invaluable!
Hi Ms.Eleanor! I feel very Blessed and Thankful to have come across your website. Your knowledge has helped me learn so much and restored home of one day being able to be a home owner even with student loan debt. My husband and I would love to become homeowners one day but we both have alot of student loan debt private and Federal. Do you have a recommended lender in the area of Georgia that can help with the IBR issue(knowing about student loans) FHA,grants, and helping to build credit back up in order to purchase a home?
Hi Eleanor,
I am looking to purchase a new home this year. I have $147,000 in student loan debt and they are all in forbearance. I have already consolidated them and my IBR payment will be $299 beginning 4/1/2016. I have a current mortgage of $725, one credit card with less than $400 in debt, and one outstanding collection account for $730. I have no other debt. I also made a huge mistake in paying my mortgage late in February and March of last year but have been on track since then. My salary is in the low $80k’s minus my performance bonus. Will I need a letter stating the IBR payments and will the late payments be a show stopper?
I just wanted to thank you for this advice. I’m in the exact same boat as this woman and was shocked to learn this information. I work for a non profit pay my bills have a good credit score. I felt very defeated until I read this blog so thank you for being an all around awesome person and bringing some hope to all of us with student debt!
Thank you Eleanor for this helpful information! My loan officer also just gave me this bad news of having to consider the 1%. However, he did not explain “where there is a will there is a way” and possibly other lenders might take my IBR if I show a monthly payment other than 0. I specifically asked him what if I changed my payment to greater than 0 and was told no and that I’d have to wait till I paid off the student loan. Do you have any contacts in Northern California?
Hi thank you for all the great information!
We ran into all the problems like everyone else it seems with the $0 IBR route. We pay $31 on one loan but the other loan never had bill. So we tried to apply got turned down were surprised as only bills were credit card/student loans each month. We talked to student loan people about reporting to credit report and they said they just needed to get amount greater than $5. So we started making $30 payment on the $0 due loan and the original $30 on other loan.
Hope to go the FHA route with 3.5% down
Will this work? We never changed plans or anything just started making payments when they didn’t require one, was never in deferment.
Also if that will fix issue of 2% of the loan total. How many months of payments would be needed?1-6
Thank you for your time.
Hi! I just received an offer on my home and it’s time for me to find a home to make an offer on. I have an IBR of $620 and I make $83,000 a year. My letter only shows the IBR payment for 11 months. I need to close on a house in February. Fed loans will not give me a letter, but they will tell the mortgage company an estimate. Do you know of anything else I could do to get a letter? I’ve thought of re-apply in for the IBR just to get another letter next month or doing a forbearance. I’m in Memphis, Tn.
Hello,
Do you know of a lender in Indiana that can help me with being on an IBR program and applying for a mortgage? Thank you so much!
Hello,
I wanted to let you know my situation. I have private student loans that I am paying off about 20000 left. I am looking at a USDA loan. I am currently making $12 an hour full time. Will the amount of student loans be used against me? And I feel like since my wage is so little I will not be able to qualify for a house.
let me know you thoughts
Hello Eleanor,
I live in SC and I have been on a horror ride trying to get approved for my home that I am under contract with. They moved the closing date back so that I can get a final approval. I am still in graduate school and I was told to put my loans in an ibr so I finally had that processed so now that payment amt is $0. But, I could only place my older loans on the ibr and my current loans could not be placed on an ibr because they would have to go through a six month grace period. Like others I am stressed and I scared that I might not get an approval. What are your thoughts and do you know a lender in SC THAT CAN GET THE JOB DONE? because I was told by the lender to take my loans out of in school deferment and place them on an ibr.
Thank you
Kelly – if you have Student Loans that have a $0 payment… no matter what kind of amortization of payment arrangement, they will be treated as a percentage of the balance for qualifying purposes. No matter what lender you work with. USDA only uses 1% of the balance as a qualifying payment amount. You might want to look at adding another borrower to your mortgage loan, like a parent.
Katie – you can still qualify for a house, and yes, the $20,000 will be used in qualifying you. Like others on this post, you will either have $200 a month counted (for a USDA Home Loan) or an IBR payment of $xx.xx when you establish that payment. If you are in NC, please call us at 919 649 5058 for more information about your particular situation.
Julie – I would strongly suggest that you look at the lenders on this list. These are the guys that work with First time Home Buyers. You want to ask if the lender has to use a Fixed Amortization payment on FHA loans. Wells Fargo, BB&T, Guaranteed Rate, Movement Mortgage and Quicken all have that additional “overlay” to the guidelines. We don’t.
Hello, Do you know of a lender in the state of Georgia that can help me with being on an IBR program and applying for a mortgage? My husband and I have Private and federal student loan debt and we want to find a lender that knows alot about students loans when it comes to purchasing a new home?
I would suggest trying someone on the Georgia Housing and Finance list. These guys should be focusing on First Time Home Buyers. You will need someone who can count an IBR payment on a FHA loan. Good Luck!
Beverly each lender will ask for different types of documentation, so that’s up to your lender.
Dustin, it’s a genius move! I have no idea if it will work, but on most things, if we have cancelled checks and can show a payment for 6 months, we can use it. No one’s ever come to us with this scenario. If you will call us at 919 649 5058 – we can take the exact information and have it approved by an Underwriter within 2 business days. 🙂
Yes, you can contact:
Colleen Craig
SocalMtgPro
Crosscountry Mortgage
DIRECT LENDER/Mortgage Banker
25115 Ave. Stanford
Suite 201A
Valencia CA 91355
Phone – (661)-310-8536
Fax – (818) 698-0389
NMLS# 254430
http://www.colleencraig.com
I apologize for the delay in responding I had the flu 🙁
Melissa – you are certainly welcome 🙂
Amber since you are now past the 12 months of past due, you would need to wait until after April – and I guess you might be selling a house? Looks to me like you have opportunity to buy a house. Give us a call at 919 649 5058
Kay! Congratulations! I suggest you look for a lender on this list in Georgia.
I really appreciate your comments. I agree – this is a HUGE problem!
Hello, I am sooo grateful this sight is here. Okay so here is my story…..I am 100k in student debt . Been RN for over 10 years . Established in my career. I live downsouth. Middle credit My Fico score 661 and rising. I applied for a FHA and was told since my loans were deferred the will count 2% , I was also told by two lenders that I have to get a FIXED Loan not IBR. So basically my DTI will increase. I have paid a furniture account off, plus traded in my car to get a lower monthly payment to decrease my dti. I make 67,000 roughly a year. My current DTI is about 38% ( with the fixed student loan and the decrease car note) and I worked to get it that low. Do you think I still can qualify? I also have more than 3.5% down-
Thanks
I wanted to share our story and offer hope to folks who might be frantically googling for hope. Getting a mortgage on IBR is possible! My husband and I are first time homebuyers, self-employed, and we each have six-figure student loan debt(!). We only make around $60K/year combined. We each have a payment of around $150 with IBR, but our credit report listed our payments as zero because Navient hadn’t updated our payment info. We were SUPER worried about getting a mortgage. We spoke to several different lenders who said they’d have to use the 1% and who were way uncomfortable with IBR.
Anyway, I wanted to come here and report that we JUST CLOSED ON OUR HOUSE!(Conventional mortgage, 20% down… we have no other debt besides student loans, and our middle credit score was 740.) Our lender used our current loan payment amount, even though our credit report was incorrect. We didn’t specifically mention that we were on IBR. We just printed off the “Loan Verification Letter” from our Navient accounts, and that’s what they used — even though that letter is very bare-bones and just says the balance and current payment. It doesn’t list the number of remaining payments remaining or indicate that our payments could change, but they didn’t ask us for more info. Just wanted to add a positive story to all the horror stories. 🙂
Hi Larry…I need your help. Please email me.
I have 105K in Student Loan debt that is in deferment. The underwriter used $1050 as my monthly payment. If I consolidate my student loans to obtain a fixed monthly plan Extended graduated Plan of $416 a month will the underwriter use the $416 payment to qualify me for my home loan? Does loan consolidation help? Is this the route I should go to lower my DTI?
Lauren, it depends on which mortgage program you are applying for. With OUR company, we would be able to count a lower payment / IBR payment. For many of our competitors, they only count a 2% of the student loan balance for FHA and 1% of the balance for USDA Home Loans. The BEST way to lower your DTI is to get an IBR payment.
Bettina – where “down south” are you??? Maybe I can refer you to someone who is looking at the Debt the way we are??? Thanks!
Thanks for your response. This process is so frustrating. My husband and I make $170,000 combined, but this student loan debts are troublesome. Can you refer someone in the St. Louis market? I am actually in Illinois, but close to St. Louis.
Thanks Eleanor, I live in the state of Alabama- All the lenders I talked too including DR HORTON, says they have to have the student loans on a fixed rate.
I think it depends on how the lender view the rule. I was recently approved for my loan (my closing date was Nov.2015) and I have a 100000 student loan and a 0 payment. I’m on a loan forgiveness program. After reading all your comments I know it was the favor of God that I got approved.
Bettina, GOOD LUCK!
Lauren, you can always select a lender from this list…
http://www.ihda.org/homeowner/findLender.aspx
Hi, Eleanor. My husband is on the IBR program currently with $0/month, and we are trying to buy our first home in SC. We were just given this news regarding the IBR program from a mortgage co., and we are trying to find out if 1) my husband can just make monthly payments of his own choosing to Navient on his own without going off of the IBR program and 2) will those payments show up on his credit report, and if so, how long with it take for the payment to appear? He spoke with a Navient rep this morning who said that yes, he can make any payment, and yes, it will show up on his credit report “within the month”, but I am dubious. Also, is there a way around this in so far as unconventional lending of some kind? (I am quite new to all of this, so please forgive me if that sounds silly!) Thank you!
Eleanor, Please provide me for a list or website to assist me with the same IBR situation as others. I have good credit, good income, and a lot of student loan student. Please help.
Hi Eianor,
I am so glad i found this page – your feedback is so helpful! My husband and I are in the process of trying to buy our first home. He has zero student loan debt (thank God) but I have $108,000 in student loan debt. Combined we make about $78,000. Right now, my student loan payments are IBR and I pay $110/month. My LO wanted a statement that my loans will be IBR for the remainder of the loan – which i can not provide since the IBR is up for “renewal” each year. Do you have any recommendations for me?
Also, at this point we are pre-approved and just placed an offer today, which was accepted! So soon we will be getting into the mortgage approval process. Do you think it is likely that we will be approved (172K loan with 10K down- FHA).
Do you have any contacts in New Jersey that could help us if we need?
Thank you!!!
Wow – that’s a weird requirement (on IBR) I’ve never heard that! Rob Rauf is a good friend of ours in NJ. I would give him a call. Please tell him Eleanor said hello!!
I’m not sure how to help, Emma. I am a lender and I help folks who want to buy a house in NC. I’ve been answering questions for folks who are in other states? I’ll be glad to help if you can give me some more information.
Hi Eleanor and all Soon to be Homeowners,
I just wanted to give you guys an update on my situation with getting pre-approved. After I was originally told that I didn’t qualify after applying for a conventional loan, I took matters further and didn’t stop at the no I received from the loan originator. I spoke with the mortgage supervisor at the credit union and he spoke with the head underwriter there at the bank. He called me a few days later and said that I was not eligible for a conventional loan, but I do qualify for an FHA loan with 3.5% down. He says that as long as you’re in repayment on your student loans even being on an IBR payment plan with a $0 payment, you are eligible for an FHA loan with 3.5% down (this is what the head underwriter told him).
Being that I consolidated my loans after being told that I didn’t qualify for a conventional loan and needed a fixed rate payment, I had to wait until my loan consolidation was complete to move forward with applying for the FHA loan. Once the consolidation was complete, I finally got my pre-approval through the credit union for an FHA Loan with 3.5% down. I even applied at another bank and got pre-approved for an FHA loan with 3.5% down. So it is possible to get pre-approved for a home loan with student loan debt.
Don’t take no for an answer, ask questions, make your loan originator work and get you answers. Also, do your homework and find out what rules the underwriters are basing their decision upon, especially if you’re denied based on student loans and being on an IBR payment plan. Someone commented and gave a link to the HUD FAQs Section on IBR payments and how loan originators should be calculating them http://portal.hud.gov/hudportal/HUD?src=/FHAFAQ , this is very useful information. Send this to your loan originator or go above their head and speak with their supervisor and quiz them on the rules and guidelines for IBR payment plans, it should make them take another look at your situation. Some times you have to make a little noise and fight for what you want…. I did and I’m currently looking for a home. I would like to see others do the same.
I have copied and pasted my original comment/ question to Eleanor below…..
“Hi Eleanor,
I appreciate all the good info here. I recently applied for a home loan and was also denied like so many others have stated due to my IBR payment plan of $0.00. I asked my loan originator before applying if I would run into any issues with my student loans and I let her know that I was currently on the IBR plan and payments were $0.00. She said no I wouldn’t have any problems and they can definitely use IBR payment plans. Well she emailed me yesterday stating that the underwriters couldn’t use the $0.00 payment, but they can use IBR payment plans they just have to have a fixed payment and term. I’m completely confused about this and I also don’t understand why the loan originator would tell me that my IBR payment plan of $0.00 would be ok and I wouldn’t run into any issues. I’m very upset about this because I feel the loan originator was not honest with me.
This loan originator hasn’t been very helpful and she hasn’t even given me any kind of advice on what I can do. Yesterday I started the loan consolidation process and once I complete the process I intend to have a payment of $70.00 per month. Will this new payment work to get me approved? Owning my own home would be a dream come true! I’m expecting my second baby next July and I really want to bring my new baby home to a home that we own. This denial has really stressed mw out because I have a credit score of 780 (and I’ve worked hard to get it there), perfect rental history for 9 years and pay all of my bills on time, I just knew I would get approved, but I didn’t and now I’m stressed to the point where my stomach is upset. I know it’s not good for the baby so I have to get something figured out, I don’t want to give up.
I applied at a credit union, so I don’t know if that makes a difference. Any advice would be appreciated…. and do you have anyone that you could refer me to, I live in Dayton, Ohio? “
Hi Eleanor,
My husband and I have been in our home since 2007 and are ready for some more square footage now that we have another child coming in July. I have about 60k in federal and 25k in private loans and we make a combined gross salary of about 80k. After reading everything on the page I have a little more hope that getting a new home is possible.
I am currently on extended and graduated repayment plans but was planning to consolidate my federal loans and switch to IBR once our 2015 taxes are done to know what adjusted gross income we have. I was hoping this would greatly improve our dti ratio.
We had a terrible lender suggested by a not so great realtor when we bought this house and it was sold to one that was even worse. Do you have a suggestion for a lender for either Kansas or Missouri? We live right by the Stateline so we aren’t sure which state we will buy in. If you don’t know anyone, do you know a good resource for finding one?
Thank you so much for all the information you have already provided!
Elanor, thank you so much for the contact information! Yes, I don’t quite understand- my student loans say “IBR 9/1/15-10/1/16″… and when I inquired about it, I was told I would need to submit my salary information on 10/1/16, I guess to justify continued IBR? I’m not sure! And I’m not sure how this will affect getting a mortgage.
Thank you for your help! This blog is so helpful and has given me some hope!
Hi Eleanor,
I’m happy I was able to find this page. I have a situation that is pretty much the same as many others here. We have a USDA mortgage application now in underwriting that we are about to lose due to my student loans that are on an IBR plan. Unfortunately, they did not accept the current payment of $0.00 that is good until renewal in November (when it will again be $0.00). We had to do a conference call with Credit Plus and Navient during which the Credit Plus rep verified the current payment of $0.00, but then asked what the payment would be if not renewed. In asking for that payment, she would only accept the 10-year standard repayment plan payment, which was about $540 a month. Obviously, we will most likely NEVER have any such payment as there is no reason to not utilize the IBR, but that doesn’t matter. If they can only take the 10-year payment, our ship is sunk.
My question in reading all of these other posts is this: If we put the loans into the ICR (income-contingent versus income-based) repayment plan which has a payment of $52 a month, would USDA accept this amount if it showed on the credit report or would they still do the conference call to get the standard payment? We’re in Georgia and could also try the FHA Georgia Dream mortgage program which is our version of the down-payment assistance option. Standard FHA with a down-payment is not an option.
We’re really discouraged now as we thought we should be clear to buy the house we’ve been looking for and finally found, and yet here we are about to lose it. Our lender has been wonderfully helpful, but she believes that even if they see the $52 a month payment, the standard payment will still be verified because it will show as an ICR student loan.
What can we do?
In NC, the USDA Underwriter wants evidence that the payment is a fixed payment, and not IBR. I would look at the Housing Finance Agency Down Payment Grant Programs.
Ok, so we have to show a payment amount for your FHA loan. Some folks are going out of Deferment, and setting up a payment. As I understand it, you have the opportunity to go BACK and renegotiate back into a different status. I don’t do student loans, so I can’t really advise you on that.
Congratulations!!! You are right, don’t give up! There are companies and Loan Officers out there that know what they are doing!!!
Lisa – those are all “handsome questions.” He can begin making payments, but it’s what reports to the Credit Bureau that counts.
Hi Eleanor,
I have been reading through some of you post and you seem very knowlegdeble about this FHA and student loan requirement. So I’m pretty sure you have already answered this but I want to be sure…..so this is my situation,
I just graduated grad school with 64k in student loans, my income is only 28k but my adjustable income is actually 21k, I spoke with my loan servicer and was told I qualify for 0 per month payment, but since I found out I can’t have 0 showing on my credit report I opt for the ICR option within the IBR program. That gives me a 14 per month payment for 12 months after which I will need to reapply. I called quicken loans for them to explain this to me and they told me I can not use any income driven program to qualify I can only use fixed payment, mind you I’m talking about FHA here. So after reading some of your post it seems as though you are saying as long as my 14 per month is showing on my credit report that is all the lender would need to qualify me?
I applied for a Mortgage in Spring of 2015 and closed on my home in May. My lender used 1% of the balance of my deferred student loans when calculating our debt to income ratio. They explained they had previously used 2% but their guidelines had recently changed. As I have around $80,000 in undergrad and grad school debt (degree to be finished in 2017) this made a substantial difference. My mortgage was a traditional mortgage (not FHA/VA etc) through a regional bank (Associated Bank) in Wisconsin.
I was approved in May 2015 for a Conventional Mortgage with about 75,000 in student loans at the time (still finishing my degree while working). My loans were in deferment so my lender used 1% of the balance (they had recently switched from using 2%. I will qualify for IBR based on my income alone (which is very complicated in a community property state…..) and I should eventually qualify for Public Student Loan Forgiveness (PSLF). I am assuming though that until my loans are actually forgiven they will count the full debt. So it will take 10 years of payments under IBR for me to qualify for PSLF and I’m sure the forgiveness process might take awhile to show up on my credit report. We plan to stay in our home at least 5 years but beyond that will depend on our family size/needs at that time. I’m assuming if apply for a mortgage any time before my loans are actually forgiven they will continue to count the full balance even though I will never pay it off (it will be forgiven)?
My friend has an IBR with $0 monthly payments. She made changes to her IBR and now her payments are $73 a month . Her lender will use that instead of the 2% which would have made it impossible to qualify for a mortgage.
Eleanor,
This site has saved me from significant anxiety. I currently have over 300k in loans (YAY PhD’s) and my grace period ends on 3/31/16. I have a job offer at 120k and found a dream home in IL. I am scheduled for IBR starting 4/1 which i plan to pay right away (as well as enrolling in PSLF). When signing up for the IBR my income was half that and my combined loan payments monthly are under $200. I was told by the LO that this small a payment on such a large loan is a major red flag and will stop me from getting a mortgage. I have no other debt. The LO reports that he spoke with an underwriter confirming this. I have read the FHA regulation via http://hudgov.prod.parature.com/ics/support/KBAnswer.aspquestionID=7963#ratingContent
where it states that the actual payment even $0 is used if that is the payment.
How would you recommend proceeding? Speaking to the underwriter themselves or keep calling until I find a lender who really know their stuff? If I am the one to educate the broker and underwriter would they be willing to change their tune? How does the underwriting process work?
Thanks again for all the info and if you have a recommendation for someone who services IL it would be very appreciated.
Hi Eleanor..I live in Marquette Mi and I am going through all of the above. My credit is good…no debt…but owe over $90,000 with pay as you earn and a repayment of zero.I was wondering if mortgage companies or whoever can hold this 1% against you until the entire time that your loan is forgiven? I thought I read after in repayment for 12 months they had to accept the payment and not use the 1% anymore…I mean can they hold it against us for the 10-20 years?? Also that Freddie Mac non occupying loan thin..so if my mom heluped me with that…would that help me against the 1% to get the loan? How does that work? Any info would be appreciated…I need to buy the house I am living in or they are putting it up for sale. .single mom with three daughtets….UGH…thanks!!!
Hi Eleanor! Great info on this page!
My wife and I are in the process of getting ready to buy in NC. I have 162k in student loans and currently have an IBR payment of $417. I am a teacher and will use Public Service Loan Forgiveness. Our total income is 140k. I have a car payment and a personal loan payment. I have enough in the bank to pay off either the car or the personal loan (current mortgage loan officer said to leave money in the bank rather than pay off). Both of our credit scores are 750+. We will put down between 40-50k on the new home depending on what I pay off and how much we get out of the sale of our current home. We will be buying in an USDA eligible area but were prequalified using FHA guidelines I believe.
The mortgage loan officer I have been talking with is using the 1% of my balance. I have a credit reference letter from my loan holder that states my payment is $417 per month total with a repayment term of 138 month. It does NOT say anything about being on IBR or anything like that. Am I stuck with the 1% for qualifying or will anyone use my current actual payment as reported both on my credit report and on my letter from the loan holder? It’s $1200/month difference which makes a huge difference in what we qualify for!
Call us please 919 649 5058, we can help you with this. The 1% is only for USDA. There are grant programs in NC that can be used with FHA that will cover your down payment
Yes, your mom can help. You can contact Holly Johnson at (614) 425-9384 / She can at least get you on the right path 🙂
Contact Larry Bettag. Phone: (630) 524-9677 If it can be done, he can help you 🙂
Anna, you are correct. A percentage of the balance will be used.
Lisa! You are correct! Student Loan Debt and a Mortgage is complicated. FHA is the best option if qualifying with 1% of the balance is simply not going to work. Each lender is treating the IBR Student Loan Payments differently (unfortunately) with FHA.. but the actual guidelines say that it can’t be Zero. So $14 works.
Hi Eleanor,
I’ve been looking to buy a house for the past 6 months in Minneapolis MN and my mortgage consultant just told me that he received word that FHA is changing their guidelines effective June 31st 2016. No longer accepting IBR or pay as you earn as suitable methods of proof of payment for student loans. Instead they adopting the 1% of student loans method to add to your debt to income ratio.
Have you heard this as well? I can’t find anything about it online… It would disqualify from buying a house since my student loans are around 90k.
I found the FHA letter here. On page 3 Section 4.
“Regardless of the payment status, the Mortgagee must use either:
1. the greater of :
1 percent of the outstanding balance of the loan or;
the monthly payment reported on the Borrower’s credit report;or
2.The actual documented payment, provided the payment will fully amortize the loan over its term.
My payments are $100 a month for 90,0000 in student loan debt. So I believe even FHA will start counting 1% ($900 a month) against me for my debt to income ratio.
http://portal.hud.gov/hudportal/documents/huddoc?id=16-08ml.pdf
It also can be accessed through this link http://portal.hud.gov/hudportal/HUD?src=/FHAFAQ
Does anyone know how bonus income is calculated in regards to USDA? Or does anyone know how to calculate properly DTI? Different sites keep telling us differently….
51,000 per year salary
1,500 -3,000 per year bonus-$1500 guaranteed and documented with pay stubs
credit card minimums- $25,25,25,46
car payment $255
personal loan $200
Credit Report shows a student loan payment of $33 due to IBR but 1% would be $528
Our proposed house payment with insurance and taxes is $724.
Our loan officer is confident that it’s fine but when I calculate I get slightly over the back dti limit at 41.42%
can anyone help me out? I’m a nervous wreck that we will get through to the end and then be denied.
Jill – yes we can help you. You should be fine slightly over the 41%. We do manual underwrites on USDA Home Loans in NC , so if you run into a problem, please contact us at 919 649 5058.
Teddy – the guideline is changing June 30th. I’m getting ready to write about that and will direct folks to the new post. Thanks
Yep – it’s all changing June 30th
Thank you so much for the reply and I am keeping your number!! I am also writing our congressmen in Ohio about this matter regardless of my outcome.
I’m a real estate agent who have had numerous young professional clients be denied of a mortgage due to their student loans. Banks are not lending due to that 1% rule in the guidelines. Regardless if your IBR or EASE monthly is $10 or $2 per month, lenders are utilizing the 1% rule which in turn, disqualifies 8/10 people who has ever had a student loan. This is really shameful bc many people even in their 30’s wanting to finally purchase are being turned down and denied. Most lenders will tell you there is no way around this, due to this very strict guidelines that was recently changed. Let’s just say my clients had enough money for the down payment and closing costs, however, due to their DTI (1% student loans factored in AUTOMATICALLY), they either were DENIED or qualified for a very low amount that only limited their purchase amount to a really rough area. The student loans are hindering many younger folks from purchasing and establishing themselves as a homeowner, and instead have no choice but to continue renting. It’s disappointing and I feel for my clients who were turned down as all see their future very bleak bc of this. The student loans stay on until you pay it off, and that’s very discouraging for many. I’ve seen the frustration with my clients and even worse, those who have started a family, yet cannot get qualified due to their combined student loans. Good luck to all in this similar situation.
Eleanor,
Thank you for putting this thread together. I have been following it myself as I am close to finishing my very expensive private school MBA and hoping to buy a house this November, as I had to wait 3 years from my short sale closing date of my prior home. My student debt is six figures, but I have two children and a good paying job so my IBR will be in the $400 range soon as opposed to an ugly 1% $1,700 monthly consideration for approval. Now, I am freaking out about the recent posts stating that the guidelines are tightening even further with the mandatory 1% rule on even FHA loans as opposed to the IBR amount that you are closing loans on now. I am anxiously awaiting your analysis. Thank you!!!
Also, after reading the update for 6/30/16, it is unclear if graduated plan payment amounts or 300 payment extended fixed plans will be included for calculations.
Thanks!
Dede
Dede – it is not clear if any Graduated payment will be allowed, or any extended fixed plans. When they made the announcement it was widely assumed that any payment that is not fixed would fall under the 1% ruling. As we receive more clarification I will certainly pass it along. I’m sorry. I personally do not understand the thought process. If the payment is based upon earnings, which are verified – why is there a greater risk factor?
You can get your home with a good mortgage broker. They can shop around for you! They know which lender to use.
Thanks
Bettina
The IBR plans are used so that once you are finished with school, you are able to live! – be an active citizen, consumer, start a family, purchase cars and homes. The guidelines don’t seem to take into consideration that IBR works on paying a percentage of your income, therefore the payment will always be in proportion to your income. You would think that lenders would gladly accept the stated payment on the credit report instead of an astronomical figure that will never be due unless the student makes so much money that they no longer qualify for IBR, which would obviously afford them enough to afford the mortgage payment. It’s thinking in circles and it is discouraging to students and families who are being blocked for taking a responsible approach to their finances.
Well my fellow graduate students, lets hope we enjoy renting the rest of our lives. Apparently the more education you seek the less likely you are to become a home owner. I have a doctorate level degree, and make 6 figures a year, but cannot qualify for a mortgage due to the 1% balance calculation. I just watched a couple of retail workers at the age of 20, qualify for a home on a combined income of 40,000, and they mortgage company wont even talk to this doctor? I cant help but ask what the hell is wrong with this picture?
Hey Eleanor, thank you so much for your feed! My husband and I are in this “$0 a month payment boat” and we REALLY need to find someone familure with First time home buyer loans in combination with the IBR. Who do recommend in MI?
Eleanor, Thanks for this blog. It has provided me with a world of information. Like most people I am in the process of buying a home and was shocked when I found out about the new FHA rule for student loans. I have 80k in student loan debt and currently working. I am still in grad school and graduate in DEC. I haven’t set any payments and I am not sure if I should consolidate my loans or get on a repayment schedule and set a payment.My loan officer tells me she is still waiting for the rule to get into effect before she can give me some valuable information. I wouldn’t like to wait and would like to be proactive so that when the time comes, I don’t have any surprises. Have you gotten any news about a work around for this rule? I live in Dallas TX. Any info you can provide would be helpful. Thanks!
This is so heartbreaking. I’ve been working on my credit for the last 2yrs..and to finally reach the point of being ready to purchase my own home, I Cannot based on these new rules. Will this effect all banks or just fha/usda?
There is hope. We closed on a home April 2016. I had to get all my 130k+ student loans off IBR and a letter stating they are a fixed payments…no flutuating. My salary is about 64k alone. I was approved for 189k. FHA 3.5% down, seller paid closing. Beautiful home in Alabama. I went through a mortgage broker whom searched for the best deal for me. Thank God! And yes it can be done with student loans. My DTI was above 41%, I had other strong compensating factors… Was financed with a bank down south in Mississippi! Dont give up!
Just FHA Loans. We think guidelines might get easier later this year Generally there are guideline changes in October when the new Budgets are approved.
So when I applied for my VA loan my ibr payments were $10/mo. Now that we are getting close to closing my payments have gone up to $290/mo. Will this hurt me getting that loan approved since I was already at the debt/income ratio limit or close to it?
Yep -a credit report is pulled again right before closing on all loans.
Hello Eleanor
Glad I came across this. I am trying to refinance my home! My husband and I both have a lot of law school debt, but we are on PAYE. We purchased our home prior to the new FHA guidelines on student loans, and the 1% calculation. I am now being told by my lender that they have to calculate 1% of our loans to get us into a conventional loan, even though our payments are significantly cheaper than that. Is he giving me accurate information? Is there some type of conventional loan out there i can get that will use my actual payments? from what i read under Freddie Mac they only use the 1% for deferred loans. Is that true? Our loans are in total repayment. Also, what is the FHA current guidelines on loans NOT in deferment but on an income based repayment plan. Would you be able to help us with a refinance? Thanks!
What guideline changes do you think may occur with FHA Loans?
They now require us to have level payments like a Car payment.
Nici – the new rules really harm folks like you, unfortunately. Yes, Freddie is your best option. If you are in NC, we would be glad to help. Most of the student loan guidelines changes went into effect 6/30/2016
Eleanor – I think I have a unique situation. I am retired and my husband is retired. We want to refinance and get a little extra to pay off some debt. My loans are in IBR for about 2 years now. Just renewed for the third time. We went the conventional route and they charged us with a payment of about $700 which is 1% of my debt (over $70,000). My payment is $0 and will continue to be because I have some health problems and can’t go back to work even though I would like to. I was a teacher. Because of this $700 they charged against us which we are not even making, they said our “cashflow” was now good enough for the extra money but simply renewed the loan. We have equity in the house,
that would help us out financially, but cannot access it because of this. If we went the FHA route, would we be able to get a better loan? We are in Georgia. Or any other suggestions?
Kay – unfortunately, you are not in a unique situation. Can you be quick claimed off of the house, and only do the loan in one name? The problem is that FHA changed their student loan debt guidelines in June. So sorry.
Eleanor, would Freddie Mac accept an IBR payment if it’s more than zero? Their documentation appears to state that they will count 1% if the payment is zero, but there’s no info about how they count a non-zero IBR payment.
It will depend on the underwriter – but yes, we’ve been told they will take a payment on the credit report. That’s how my company is underwriting Conventional loans. Additionally, Freddie goes over the 45 DTI ratio, and they have a 3% down payment program.
Hello Eleanor
I have about $160000 in student loan and they are on a income based repayment plan with a payment of $0.I will like to know what my options are.I know Freddie Mac only take whatever is on the credit for Ibr..I had 10 different lenders pull my credit in the last month and all said I can’t be approved. I make $55000 a year and trying to get a $200000 home.
Dee, if 10 lenders said you are not going to be able to buy a house yet, then my guess is – they are right. When we run into this problem, we are generally telling folks to have some sort of payment arrangement on the student loans, and to find a non-occupying co-borrower. There’s a 3% down payment loan from Freddie that allows for a co-borrower.
Dee I had this problem before I bought my home. My broker told me to get my loans out of IBR and pay a fixed amount. It has to be a fixed amount and it will increase your DTI. But thats ok, at least you can buy. I have 160k in student loans and make 61k anually. I was approved for 200k but took out 189k. Go with a mortgage broker so they can shop your loan. Goodluck!!
Thanks Tina! Great feedback, and you are right 🙂
Dee,
I have 100k in students. I was also in a zero pay status with IBR. I went back into repayment, in the amouht of $175 monthly, about 6 months before we closed. We have combined income of 130k, our home was purchased for 365k using a VA home loan.
That’s correct – VA does not mind if your student loans are not on a level payment – however, FHA, USDA and FNMA will no longer allow us to use a payment that is not a “level” payment. Freddie Mac will now allow us to count the payment if it is showing as something other than “zero” on the credit report. THANKS!
Hi Eleanor, I am currently going through the approval process and my lender thinks that he can get me approved for an FHA loan. I have about 121k in student loans and make 85k a year. I am on IBR and pay $535 a month. He says as long as this payment is reflected on my credit report he can get approved. I live in MD by the way, am I wasting my time?
Eleanor,
My mortgage company said I had to take the payment out of zero status and go back into repaymemt before we could proceed even with the VA loan.
Well, every company is different The VA Guidelines don’t make you do that, and we follow those in this situation.
Well, the guideline changed at the end of June. Most underwriters are requesting evidence that you have “level” payments on all student loans for a FHA Loan. We have LOs in MD (so I can refer you) – and I don’t have your file – so I can only tell you that the guideline changed. I am POSITIVE that a USDA Underwriter will require evidence that the payments are level payments.
Hi Eleanor, do you do loans in California? If not, do you know anyone who does Freddie Mac loans by the guidelines in California? Please let me know, thanks!
Dear Eleanor,
I just found out today from my lender that the FHA rules have changed 2 weeks ago. I was preapproved to get a house with making $200 a month payments IBR with my $250,000 student loan debt. I was just about to enter underwriting when he called with this news that it didn’t matter anymore if you make a payment and are on IBR. FHA now requires you to count 1% of your student loans toward your debt to income ratio. I make $45,000 a year and he said with my debt it was impossible. Is this true? Did FHA guidelines change? I live in Fort Wayne Indiana. Please help!
Julie with FHA Case numbers that were pulled after June 30, FHA is not allowing graduating payments on Student Loan Debt. Freddie Mac is the only option, and you will be required to make a slightly higher down payment.
Colleen Craig will be able to help you, please tell her I suggested you call.
Colleen Craig
Crosscountry Mortgage Inc. NMLS #3029
25115 Ave. Stanford Suite 201 A
Valencia, CA 91355
Direct -661-310-8536
Thank you for the reply. Do you know any lenders in Indiana that follow the Freddie Mac guidelines and do not have overlays? I am having trouble finding one that will do the IBR. Thank you so much for your help!
I have a small amount in student loans for 30k and I am on the ibr with 0 payment. I was told I could do a forbearance for 14 months and get the mortgage. Is this true for a VA home loan.
Eleanor,
Could you connect me with a Freddie Mac lender in the Oklahoma City/Norman, Oklahoma area? That might be the best option for us.
We have a similar situation to others here. Excellent credit scores, 20% down payment, jobs (lol), but the debt to income with the 1% is too much.
Thankful for this info feed. It’s made me feel less terrible about our situation. 😀 And that there are possibly reasonable options available.
-Amy
Amy! Here’s a list of lenders who should be familiar with this very real struggle to buy a home with Student Loan debts. You want to ask them if their Underwriters go by the Freddie Guidelines. Best wishes as you go through the Home Buying process!
Mike, Veteran home loans do not have the same restrictions you are reading about on other programs. Yes, 14 months should work. If you are in NC, please call us, we’d love to help! 919 649 5058
Just checking in here again, do you do loans in California? If not, do you know anyone who does Freddie Mac loans by the guidelines in California? Please let me know, thanks!
My friend Larry Bettag is a Regional VP for Cherry Creek Mortgage. They have offices in Indiana. He could probably get you to the right folks. Larry’s number is Phone: (630) 524-9677 / please tell him I referred you. Best of wishes!!
No, I do not – however I thought my friend Colleen was going to contact yo, so I’m sorry. Her name is Colleen Craig, her contact information is Sr. Loan Officer
Crosscountry Mortgage
25115 Ave. Stanford Suite 201A
Valencia CA 91355
Cell 661-310-8536
http://www.colleencraig.com
Do you happen to know any lender in Georgia.I am having trouble finding any lender to help me getting a loan with my IBR
Dee, the only way for you to do this is using a Freddie Mac Lender and making a down payment. The IBR will have to be completely in some sort of payment program.
Thank you, Eleanor!
Do you know any lenders in Massachusetts? I am having the same issues as many others. My husband and I are both on income based repayment and are having trouble getting that final approval based on the standard repayment being counted against us.
Thank you!
Jennie – you will need a lender who sells loans to Freddie Mac, and you will need to make a down payment. Freddie Mac has a 3% down payment plan, and offers non-occupying co-borrowers as well. Here’s more information on buying a house with student loans today. Lenders I would call in Massachusetts will be found on this list. Good Luck!
Hello!
I am in a situation where I need to use my IBR plan to apply for a mortgage because the amount is only $111 per months, well below the “standard” $514. My only issue is that I made the “mistake” of going back to school and I can’t use my IBR because the loans are in deferment. My only option seems to be to stop going to school so I can re-enter my student based payment plan or wait until I graduate, which is months away. This all seems a bit silly when all I need is a form stating what my payment would be based on my income. Any help is greatly appreciated!
Mark – you are like so many people that are caught in a tough spot with Student Loans wanting to buy a house. So sorry.
Hi Eleanor! Thanks so much for this post. I am going through the same issue with our lender not understanding how IBR works and the fact it is renewed every 12 months (and not fully amortized at the end of the current 12 period). They are looking into the future – 8 months from now when my current IBR payment expires and not understanding it will just be renewed for another 12 months. Do you know any lenders that understand this better than the average lender in Arizona? Any recommendations would be most appreciated. We have been dealing with this lender for a over a month and with closing in 3 weeks, we need a good lender that understands our situation like you do. Thanks so much again for helping so many people with this article and dialogue!
Hello, I have the student loan issue like so many others. I was set to close mid September and I was just told that my financing is falling apart because I’d the change in the student loan requirements. Can you recommend a lender in North Carolina that uses the freddie mac guidelines. Thank .
I pulled my credit report to see what payment amount is listed. My consolidation from fedloan is not on my credit report. My credit report is reporting all my student loans are paid in full. I contacted lender and didnt get a response. Some reviews online report the same issue of fedloan not reporting to credit bureau. I’m doing everything I can to get my dti lower, so I can purchase a home asap.
Jassica we are a NC lender, and offer Freddie Mac. Our number is 919 649 5058
You can call Mike Jones in Tuscon Arizona. Here’s a link to his website:
https://www.sunstreetmortgage.com/jones-mike/
Hi Eleanor,
Update- I finally purchased a home on June 27th right before all the changes to FHA guidelines… talk about cutting it close!!! Thanks to this blog that I still follow religiously, I found out about the changes and spoke with my loan originator who confirmed it. If I had not subscribed to this blog I would not be a home owner. I found the perfect home, with awesome sellers that I still stay in contact with even if I have a question about the house, they’ll come over and help us out. I had my baby July 7th and was able to bring her home to a home we own. I couldn’t be happier, it’s a dream come true and I couldn’t have asked for anything more.
Although I’m happy and purchased a really nice home I consider the home to be a starter home and would eventually like to sell. It will be a few years from now, but do you think guidelines will change again to allow more people with student loan debt to purchase homes because my student loan debt is not going anywhere anytime soon?
Brittney! Congratulations! With so many people with Student Loan debt, I’ve heard that a nw program may be in the works. Here’s some more information about that proposed program to help folks with student loan debt buy a house.. The basic idea is to tie your student loan debt to your home, and allow for higher ratios.
If it is showing paid in full, then it’s not hurting your score. Do NOT however, stop making payments. As far as I’m concerned this is good news. You can send us the credit report to be sure we agree with what you are seeing.
Hi Eleanor- update! I have $185k of student debt. I finished my classes in the summer and have applied for a consolidation. My estimated repayment on a thirty year fixed loan is $1300. By the skin of my teeth I can get approved for an Fha home this November. My lender wants me to get my consolidation through before I apply through the Fha automated approval system. Additionally, I talked with navient and with student loan consolidation. They have both verified this- I can go on a standard 30 year repayment and get approved on a home. Then I can call and put a 60 day “administrative hold” on my repayment. Then I apply for an income based repayment which will be more like $400, since I am the sole income of my family. I work in non profit and plan to use pslf after ten years. Keep your fingers crossed for me and hopefully I can get a house this holiday!
Dede! Great news! Thanks so much for the update! Fingers crossed!
I am currently going through the loan process of closing on a home. I have about 122k worth of student loan debt, and currently my payments are $545 a month under IBR. I called my student loan servicer and they told me that I could switch my monthly payments over to a standard level payment over the phone for a processing fee of $10 in which my payment would be $888 a month versus the 1% at 1200 that FHA requires. Thankfully I would still qualify under the debt ratios for FHA even with the increase. I was told by my servicer that they can produce this letter immediately with a phone call and I could switch it back after my home loan closes. I will keep you posted if all goes well!
Mina that is great news! We’ve seen this work before! Fingers crossed.
Hi All,
Not sure if you know but with all the changes the conventions loans through Freddie Mac will accept IBR payments and only require 5% down. This may be the model that folks end up transitioning to until the rules get better! Eleanor can your team provide information on this loan type as well? May be a good alternate to offer these days!
Nichole, we did address the Freddie Mac program with this post about “Buying a House with Student Loans.” As a side note, we are closing a loan for a borrower who does research at a local University next month. The loan is approved – we are just chasing conditions. The borrower has $178,000 in student loan debt, and her IBR payments are $364 a month. We have her locked in as a Freddie Mac loan, and she’s only putting 5% down. It does work.
Hi. My name is Jose. I was preapproved for a conventional loan with 5% down, NO PMI, and 3.625 interest rate. I have 128k in student loan debt. I graduated in May and am scheduled to begin payments in December. Loans are currently in deferment. Underwriter requested that I pay off 16k of my student loans so that I am eligible for the Freddie Mac and that I am ineligible for Fannie Mae because they must use 1% of my student debt. However, I recently learned of IBR and Public Service Forgiveness Programs. I requested an “IBR estimate” and was told that payment would be about $100–way less than the $750 payment on a 25 year extended plan. Will Freddie Mac accept the new IBR estimate? Or do I have a better chance of paying the 16k and continuing the loan as is?
Additional facts: All three of my credit scores are above 800 and I have no additional debt. Salary is 70k per year. Thanks. I am very happy that I found this forum. Probably should have looked for it before finding the house that I like : )
Jose, it’s our understanding that you actually need to be making payments for the Freddie Mac IBR. So, you may need to make a payment early – but that would still be less than paying $16k. If you are in NC, we’d love to help you!
Thanks. I live in Texas. I called loan provider to expedite paperwork so that I can make payment asap. Wish me luck!
That is great news! Congratulations on deciding to buy a house!
I am in a situation with an IBR where I just want to assume a loan where there is an investor on the loan. I have been making the payments and the investor has not had any financial interest in all this for over five years. I was just denied to assume the loan and am in great stress and very fearful that I am going to loose my home. I live in Colorado and the home prices right now are where people are becoming homeless due to the madness. I just wanted to see if ANYONE could help me?
LaRhonda, I don’t really have information to add to that question, but I’m leaving it here in the event someone else can help. I know Cherry Creek Mortgage is in that area, and they are very good. Best wishes.
Hi Eleanor,
I’m in the same situation as everyone else. $245000 in loans on an ICR – Income contingent repayment of $758 per month. Just tried to get an FHA pre approval and was told the underwriters will probably use the 1% rule. $2450 per month basically disqualifies me for a $150000 mortgage. I make $86K and have no other debt. I can afford to make a 20% deposit on the house. Who should I talk to in Pennsylvania that could make this work. Thanks, John
Call Vicki Winrader at Cell Phone: (724) 822-6769. She can do a Freddie Mac loan for you! Great news!
Hopefully this can help some of you. I have about 122k worth of student loan debt, and live in a very high cost area, so being able to afford a home in a decent area can be very challenging. I was able to remove my loan from under IBR, and set it as a standard payment. Had FHA used the 1% rule I would be looking at a 1200 a month or more payment added to my dti. But under the level payment it came out to be $888 a month which is still quite high, but low enough for me to afford a home in a safe area for my kids. I just closed on a house last week, I was able to get a higher DTI with FHA so this helped me as well. My income is 85k. I will be putting my loans back in ibr now that my home loan has closed.
Congratulations Mina! We’ve seen folks in NC do that. After closing they went back and put the student loan debt into IBR status.
Hi sounds like good news. Please tell me how to do this because I just lost 2200 thinking I was going to close and was hit with the 1%and FHA would not do it I lost earnest money and appraisal money and other expenses. I am very distraught and disappointed. Thank you
We were able to close of our home loan with IBR this month. We have about $150,000 in student loan debt and the Credit Union used the loan payment documented on the credit report. It can be done you just have to work with a bank that knows the guidelines for underwriting.
Rose, you can always email me directly with questions too 🙂 ethorneATcallequityDOTnet I’m glad to help anyway I can. I know this is difficult for so many folks.
Hi Ms. Thorne, could you please recommend someone that could work with me in the DC area?
If you are in the “Virginia” side of DC then I would suggest calling Sean Andrews. If you are in the “Maryland” side of DC, then I would suggest calling Laura Fournier / Please tell them that I suggested you call them / Good Luck!
Thanks Eleanor for the contact information. I have been working with Vicki Winrader here in PA per your suggestion and it looked like everything was going to go through. Then I hit a glitch. So this is just an FYI for anyone going to try using Freddie Mac for a mortgage. Don’t have anything in dispute on your credit report they will not give you a mortgage if you do. I had 2 items on my credit report that were still listed as in a disputed status even though both had a zero balance and had been satisfied. The creditor never updated the verbiage on the item. Now I am in the process of getting these cleared which is going surprisingly good, but since they updated the status of these old(over 2 years) items now they show as updated this month and my credit score took a pretty big hit. Bottom line, if you want to avoid frustration make sure that every detail (look at the comments section on anything questionable) is as accurate as possible on all 3 of the major credit reporting services before you start this process, it will save you a lot pain. I’m going to make this work but it shouldn’t have to be this hard.
UPDATE!!!!!
Eleanor and friends,
I have been a part of this board for a year and actively followed your posts and responses. I just CLOSED ON A HOME yesterday in Denver! I have so much thankfulness for the awareness and insight from this blog. It literally got our family this home.
I have six figure student MBA debt and bankruptcy on my record from 2 1/2 years ago, along with short sales and foreclosure. I had a terrible three years financially due to my ten year business going under and my rental homes upside down in value. However the past few years I have had a great job, rebuilt my credit and had two children. I did a 30 year consolidation (fixed) on my student loans, showed the letter to the underwriters, and they used that amount as opposed to the 1% of my balance which would have only got my approved for $200k (nothing in Denver is at this price). This 30 yr repayment plan got me approved for a nice place!!! Now I am changing back to income based repayment (public service loan forgiveness is my plan if Trump doesn’t take it away). I was approved for $302k FHA loan and locked in at 3% interest. Our family closed on the home yesterday. I am SO thankful!!!! Please don’t give up, it may take patience and perseverance, but you can make it happen!
JUMPING IN THE AIR! CONGRATULATIONS!!!!!
CONGRATS CONGRATS CONGRATS… If you don’t mind me asking a few questions as I am in Denver as well. What was your credit score and who did you go through.
LaRhonda-
Call brandy and Igor at Trust Home Loans in Denver! 720.535.4321
Tell them Dede & Chad recommended. Igor is the most honest, yet determined loan officer around! My score was close to 700, just under I believe. Best of luck!!!
Thanks so much!!!
Hi, Ms, Thorne,
Thanks for this blog post. Would you know of anyone in Nebraska that works with Freddie Mac and IBR loans? Trying to buy a home and looking at different options with IBR.
Kadi – I would contact the folks on this list. It’s your Nebraska Housing Authority, and they offer first time home buyer options through a very trained group of lenders in the state. Be sure to ask them about the MCC and if you qualify, certainly apply for that as well. Best wishes! -E.
http://nifa.org/programs/programs.html?pi=430&search_var=prog&prog_name_sent=Single+Family
Could you recommend me to someone that can help me In Orlando fl to purchase a home on IBR plan.
Please call Gerry Suarez Jr
725 E Alfred St
Tavares, FL 32778
Phone: (352) 516-9884
Fax: (866) 677-2524
E-mail: flmortgageguru@live.com
http://www.experthomeloanadvisors.com/staffprofiles.x?id=841462
Tell him I suggested that you call 🙂
Eleanor,
Hello from Kentucky! Let me just say that I am SO happy I found this page!!! I currently make around 30,000/yr, and have $31,000 in student loans. That is the only debt that I have. I have 5 separate loans which are all on an IBR plan of $0/mo. When trying to get pre-approved for USDA my lender explained that they could not have a $0 payment and instead she used the payments that showed before I went on the IBR(These amounts were on a standard repayment plan, which I obviously can not afford) When adding these amounts it came to be right about $350 a month. Which made by DTI ratio too high to qualify. Even if they just used the 1% it would still be $315 which I assume wouldn’t make that much of a difference in my ratio. She explained to me that FHA loan might be a better option for me since they usually accept a higher DTI ratio, and saving the 3.5 percent wouldn’t be that difficult since I’m only looking for a property that costs around 100,000. I currently am living with my parents and I am beyond ready for a place to call my own, so I would prefer to do the USDA loan if it is at all possible to get my ratio down. Do you think I would be able to get my student loan lender to change it to allow me to pay small amounts on them so it doesn’t show as $0?? I’m desperate and really don’t want to wait 5-6 more months.
Also, If I did decide to start saving do you think it would be more beneficial to save for a down payment? or to pay my student loan amount down. This stuff is so confusing to me and I don’t feel like the banks here care about my business enough to sit down and really figure it out with me since I’m not wealthy. PLEASE HELP!
THANKS IN ADVANCE!!
Amelia
Amelia! You need to call my friend Joel Lobb. He’s in Kentucky and will b able to guide you through this process.(502) 905-3708 – tell him Eleanor said for you to call. Good Luck!
Hi Eleanor,
This page has been very informative, thanks for posting this info. 🙂
I currently live in Mississippi, and in January I am expecting a pay bump to $52,500 annually. I am hoping to purchase a home in my area for under $150k, however, my student loans are holding me back. I owe over $100k in student loans from graduate school, and am on an IBR plan that currently requires me to pay $0 per month (but I’m willing to re-apply for a fixed monthly IBR payment if it will help me get a mortgage). I will likely never be required to make payments on a standard repayment plan. My only other debts are my car payment ($358 per month), and one credit card that I’m able to pay off fully each month. My credit score is over 700, but I’m running into roadblocks with lenders over my student loan debt. I hate living in my apartment and am ready for a change I’ve worked hard for. Is Freddie Mac my only option at this point?
Thanks for your time and your help,
Tiffany
Yes – unfortunately, you will need some sort of payment (doesn’t need to be a full, level payment – just not zero) and you can apply for a Freddie Mac Loan. THERE IS SOME TALK that there will be more options late next year. No idea what those will actually pan out to be – but I will notify folks as we get more info. Good Luck!
Hello! Do you know of anyone in the Ann Arbor, MI area that is as knowledgeable as you about home loans and student loans?
Yes, please contact Catherine Gee-Robinson 419-467-3859. I talked to her this afternoon, and she will be glad to help you. Please just tell her Eleanor suggested that you call 🙂
I am looking for someone who can help me finance an house with student loan debt. I make $50,000 a year maybe more. I have student debt of $64,000 and a car loan payment of $300/mo. I am planning to pay off the car loan so the only thing I have is the student loan to deal with hopefully. The house is $170,000. I qualified but only at $97,000 because of the student loan and my car loan so I did not know where to turn. They did not want to include my other income because I had not been on the job for 2 years. I want to move in 2017 , I am shooting for March or April time frame if possible. My credit score is between 620-660 right now and I really need to move. My sister is also looking to move to a condo, but also is running into the same issue with student loans. Is there anyone you know can help us both.
Thanks for your time.
Chris
If you are in NC, please call us – we work with many people who have Student Loan Debt. Our number is 919 649 5058. If you are in another state – you need to contact a lender who sells loans to Freddie Mac.
$170,000 is an extremely high mortgage at your income level regardless of student loans. You could take that large would-be mortgage payment and pay off your $64000 student loan in a few years. Rule of thumb with moderate credit scores is up to 3x yearly income, give or take due to taxes. So you’re looking at a $150,000 target amount by a generous lender, the $97000 seems pretty accurate to me. Also, the lender will look at monthly DTI, not the total debt- meaning your monthly payments in comparison to income in order to issue your pre-approval amount. Good Luck!
Go out of the IBR and have your loan services issue you a document with the standard payment theough the life of the loan and then go back onto IBR after you close on the house. Your purchase price will be limited to what your standard payment will be whether you will ever pay it or not. There is no way around it. With your only other debts just being a cc & auto loan with a good credit score, you just may not get the higher approval amount you’re looking for.
Hi,
My husband and I are looking to buy a house this year and running into the same problems. We took our loans out of forbearance so they would have a payment showing on our credit report. As soon as we did, we found out that lenders now use 1% of the balance of the loan for your payment, even though our payments are much less. How do we go about finding a lender that uses freddie mac guidelines in Indiana? We don’t want to go through the process just to get turned down at the last minute before closing.
Thanks!
This page is awesome! I’m in the contemplating process of wanting to purchase a home…have $200k in SLDebt and am on an IBR plan ($450/mth). Would a lender look at the IBR payments for my ratio or the 1% balance? Would it be better for me to work with Nelnet on a temporary fixed payment? Am I limited only to Freddie? And last question, do you have any recommendations for Georgia? Thanks so much!
Faye, yes you are limited to Freddie Mac, unless you can go to a temporary fixed payment and then reverse it after you close. If you can still qualify with the fixed payment, then you can use any program.
In Georgia, I would contact Mark Moore with Fairway. If he can’t help you, I’m sure he will know who can. Congratulations on your decision to buy!
https://www.zillow.com/lender-profile/Moore%20Team/
I don’t have a contact at this moment in Indiana, but I’ve reached out to a few people. If I find someone I will let you know / there are many lenders signed up with Freddie Mac.
Hi Eleanor, I started working with a lender in November and was preapproved for a Conventional Loan. During my preapproval process my Lender stated they could use my IBR as long as I provided them with documentation from Navient, which I did. In the meantime I found a house and I am set to close in 2 weeks. Now my lender is stating that they would have to use 1% of my student loan balance or an amortized amount. Using 1% or the amortized amount puts me over 50% DTI; do I have any other options? and is it too late to switch Lenders? Please advise.
Annette! Are you in NC? We can help you with the purchase, assuming the Lender will transfer the Appraisal over to us. Please all us at 919 649 5058
My apologies Eleanor, I am in Maryland. Would you be able to recommend anyone for me in Maryland? Thanks.
Yes, you can contact Arlene Dean with Equity Resources. Please let her know that I referred you. Best Wishes!
Office Phone: (410) 586-1111
Cell Phone: (240) 372-9457
Hello.
Thank you for a very informative post.
I live in Texas. I just spent 4 hours reading the entire post from 2015 until yesterday.
Lots of great information. I am supposed to be writing my thesis, I graduate in May 2017, thesis due in one month, but I could not stop reading this blog. My wife and I have student loan debt and it is encouraging to see how many people are in our shoes, but with hope to buy a home. We have outgrown our current home, have 3 children, 10, 7, and 5. My lovely bride is stay at home, home schooler, disciplinarian, cook, house keeper, laundress, lover, etc. etc. We want to purchase our second home after I graduate, and this blog has opened my eyes to a great many things. 4 hours well spent.
Thank you madam for your tireless effort to give people hope.
Best regards from Texas.
Jake Sanchez
Good afternoon Ms. Thorne, thank you again for keeping this thread.
Could you please recommend someone that I could work with in Washington, DC?
Regards,
Thank you! Congratulations!!
Hi again,
As a reminder to all- this blog changed my family’s life and allowed us to purchase our home last year with student loan debt.
My question for Eleanor today is that I have several peers who attended the same expensive private graduate school as myself and also work in public service, planning towards public service loan forgiveness after ten years of minimum payments. One of my friends is hoping to buy in 2018. I sent her to this blog and she shared her concerns about the future of Freddie Mac allowing the actual income based payment amount in their debt to income calculation. Do you have any knowledge, predictions, or commentary regarding the future of lending and current law vs. the fear of Freddie Mac jumping on the FHA/Fannie bandwagon of insisting to look at 1% or balance or extended fixed payments, as opposed to their current acceptance of IBR?
Thanks again
Dede, thank you so much for your kind words. With the new Administration in Washington, from my humble viewpoint – it’s anybody’s guess what they will do. I am aware of new programs being introduced in California that would somehow tie the mortgage and the student loan debt to an extended term mortgage. I don’t feel that in the case of someone who is going to work for the government for loan forgiveness, this is any kind of option. I am engaged in quarterly calls with Freddie Mac, and I can tell you that there’s been no information from Freddie that points to them changing the guidelines on Student Loan Debt in the next 6 months.
Very thankful I’ve found this blog. Imagine if we didn’t have the internet!
I have nearly $170,000 in student loan debt and am on the IBR plan with payment of about $250 a month. Looking at the Freddie Mac option. Can you recommend a lender in the Central Wisconsin area? I currently live in Eau Claire, but want to buy a home in Marshfield.
Tracey! Congratulations on deciding to buy a home! I do not personally have a contact in Wisconsin (need to work on that) but if I was in your situation, I would start by calling folks on this list! GOOD LUCK!!
First, thank you for maintaining this for the better part of two years – the information has been really helpful, though perhaps a little depressing…
I am in the same boat as a vast number of people on this board (around 120,000 in student loan debt, without enough of an income to qualify for a loan under the 1% “rule”). I have a couple of questions that I would be very happy for the answer to. I am on an income-based repayment plan, and am paying $0, which I understand will not be used when qualifying (or not) for a home loan. If I were to somehow negotiate a payment within the income-based repayment plan, do they use that amount of the negotiated payment, or do they still calculate the 1%? Alternatively, if I were to somehow negotiate a fixed payment (out of the income-based repayment plan), would they look at that payment, or the amount of debt to qualify? And finally, if I were to negotiate a different payment by either making a fixed payment within the income-based plan, or by paying a small amount outside of the income-based plan, how long would I need to be making that payment before I could qualify for a loan?
Thank you again!
Rebecca, great questions! This is a huge problem, and if someone is talking to Congress, it should be part of the discussion IMHO!
1. If I were to somehow negotiate a payment within the income-based repayment plan, do they use that amount of the negotiated payment, or do they still calculate the 1%? ANSWER: If you negotiate A PAYMENT let’s say the individual loan payments add up to $270, then we count the $270 on Freddie Mac, not the 1%. This is going to mean you need 3% down for a Freddie Mac Loan.
2. Alternatively, if I were to somehow negotiate a fixed payment (out of the income-based repayment plan), would they look at that payment, or the amount of debt to qualify? ANSWER: IF you obtain a FIXED payment (not IBR), then you would qualify with that payment for a USDA Home Loan or one of the Grant programs, meaning you would not need the 3% down payment. I know that if you negotiate from deferred status on IBR to a small payment, then you can go back after closing to $0 monthly payments. I don’t know if that’s an option if you go to a fixed payment. I would ask.
3. And finally, if I were to negotiate a different payment by either making a fixed payment within the income-based plan, or by paying a small amount outside of the income-based plan, how long would I need to be making that payment before I could qualify for a loan? ANSWER: 1 month needs to report on your credit report. Because we have the ability to add rapid re-scores, you could have a loan officer do it in less than 30 days. To fully cycle “naturally” because different agencies report to the credit bureaus at different times of the month – it could take 2 months for it to show on the credit report. We just want the payment on the report, not zero.
CONGRATULATIONS on deciding to buy a house! I hope this helps.
I have loan debt. I transferred to extended fixed. I received the documents stating I had a 30 year payment with amount in 2 weeks. I closed USDA and same day tranferred back to IBR. I didn’t have to ever make the full payment.
It is easy and simple
Of course, who knows what will happen in the twilight zone.
Go for it!!!!
Congratulations!!!!!
I recently closed on a Freddie Mac loan with 3% Down. I have over $120,000 in Student loan debt. I went on IBR with a $189 payment. Within in 2 months, the payment was documented on my credit report. The bank was able to use the payment on my credit report instead of the 1%. Once we closed, I went back to deferment. Thank you so much for this site. Without your guidance, we would have never known about this option, and we would have never closed on our dream home!! Thank you!! Keep the faith everyone! Home-ownership with a high student loan is still possible.
Thank you so much for your kind words!! Congratulations!
Hi Eleanor!
Glad I found this marvellous blog! Thanks for everything you do! I will be looking to buy a house in the next few months. 48k income, but 54k in student loans, credit score about 750. Was considering buying a house w/ my boyfriend (28k income, no debt, 800 credit score)…right now we are in the process of getting the last of our down payment/closing costs together.. We are hoping for a home between 150k-200k. I have a couple questions for you, if you don’t mind. 🙂
1) I have been in IBR repayment for a few months (w/ a payment of less than $200)…if I were to switch into a standard level plan my payment would be about $404, which hurts my DTI. Would you recommend switching to standard repayment in order to get approved for a USDA loan? Or stay in IBR and try to go the Freddie Mac route? Obviously hoping for the lowest rate, etc., and heard USDA loans were the most cost effective? What is your opinion on this?
2) Would you happen to know of a good lender in TN you could refer me to who does the Freddie Mac w/ no overlays? Thanks bunches!!
Michelle, unfortunately I don’t have a contact in Tennessee. So sorry – but from what you are describing, a Freddie Mac loan is what you need.
I’m so glad I found this blog! We are in a similar situation to many in this thread. My husband has about $170,000 in student loan debt. We currently own our home, but are moving to a different town. He is on the income based repayment plan and our payments are currently $0. I am a stay at home mom since the end of last year so we can’t get a loan solely based on my income, and our debt to income ratio is too high since they are counting 1% of the loan. I’m wondering if we can negotiate a fixed payment in order to qualify for a loan, and then go back to the income based plan? Also, do you have any lender contacts in the Dayton, OH area that we could contact to help us?
Eleanor, is Tom Burris still your contact for help with this situation in Texas?
Yes. Have you contacted him?
Ashley we do loans in Dayton. We have a new Freddie Mac Loan coming available next month that I think will help you. Freddie Mac will work with Student Loans in IBR Status. It probably won’t be available until the end of the month, but you can contact Cathy for any updates.
Ashley Wynn- I live in Dayton, Ohio and I got financing through Mortgage One, Jack Lozan was my loan originator and he knows what he’s doing. I owe a lot in student loans as well, but he was able to walk me through the entire process, which made things less stressful. I also had an awesome agent, who I found after going through 2 other agents, I finally found the perfect agent. I didn’t think it was possible to purchase a home because of my student loan debt, but I had a good team and I’m coming up on a year now that I’ve been a home owner. I want to also mention that originally I financed through Mortgage One, but they sold my loan to Wells Fargo. Please give Jack a call, he’ll put you in the right direction and if you don’t have an agent please call Dana Pant.
Mortgage One-Jack Lozan- (Loan Originator) 937-369-6480
Dana Pant- (Real Estate Agent) 937-554-8782
Yes, just talked to him today. Thanks for the information!
Hi,
I have situation where I am currently in graduate school and all of my student loans are in deferment. I have over 100K total in loans. My credit score is pretty low like a 590 maybe a bit higher and I have been working toward raising my score with a secured credit card. I make about $2400 before taxes with court ordered child support $580 per month (compliant) and $400 per month (non compliant) I also have about $1800 in collections on my report. I was working with a loan officer who advised I pay off the collections as FHA does not allow any collections to qualify for a loan, and complete a homebuyer’s class for a grant(which I have done) . Now he asks for my student loan payment info. I was able to get documentation from the loan servicer for IBR payments $11. I have a couple other Perkins loans one payment at $53 Under the standard plan I would be looking at probably $1100 per month total. Now my loan officer is stating that is not good enough and that I need to obtain a letter from the servicers stating the payments are fixed and will not change and fully amortized. Obviously with IBR the payments will change every year if the income goes up which I doubt mine will be much more anytime soon. But with the standard payments its completely unrealistic. Can you advise which kind of loan I should be looking into. I was told by another loan officer conventional will accept IBR but my scores need to be 660-680. I am in a situation where I have to move soon and I cannot afford the cost of rent on my current salary. Can you advise me if this is even possible for me to qualify for anything with IBR and my current score? Also do you have any contacts in Illinois? I am located in Chicago thinking of staying in the area or in Illinois. Any advice would help please.
Hello everyone, I’m so grateful I found this blog! I’m in a similar situation and would really appreciate if I can get some guidance. I’m currently attending school and my school loans with Nelnet are in deferment. I have about another year of school left, but I’m willing to get off deferment if that will allow me to get a loan. Right now my student loans are 80k. Me and my husband make 92K a year combined. The only debt we have other than this Student Loan is $540 car payment and we saved a $10,000 down payment. my husband has a credit score of 720 and mine is 665. What will be the best way to proceed in this case? We are looking to buy a house in Indiana. If I come out of deferment into an extended fixed rate of go on IBR my payments will be around $300 a month. Will this work for me or do I need to quit school for now. Can I still be qualified if I’m still in school but making payments? Thanks in advance!
Dori in the last 24 hours, Fannie Mae changed their Student Loan payment requirements, and will now accept IBR payments again!! YAHOO!!! You can get a loan if you are a student, and we can do the loan strictly in your husband’s name – leaving your student loans off of the note. I’m in NC, and we are a Community state. That means in our state, if the spouse buys the property – you are automatically entitled to ownership. You would need to check this for Indiana. I have been suggesting that folks contact lenders who specialize in First Time Home Buyers. Here’s the list for Indiana. Congratulations! Hope this helps!
You need a different loan officer. I’m so sorry. You will likely need a higher credit score. I would think it would need to be near 640 for the kind of loan you need, which is either the new Fannie Mae loan that came out yesterday or the Freddie Mac.
Please contact Larry Bettag, and someone in his office will give you honest feedback on the entire process. smh You are VERY close to meeting your dream of home ownership. Do not give up!
http://www.cherrycreekmortgage.com/lbettag/bio
Thank you so much Eleanor!
I am on an IBR with zero for payments. The mortgage companies state that they have to put down $700 a month for student loans. Do I need to make small payment arrangements with the loan companies to report a small monthly payment or can I just pay them some per month and it shows up as a payment on the credit report so the mortgage company can use that?
I have been on this repayment plan for two years now and this is so frustrating. Also, rent is way more than payments on a mortgage, don’t they take that into account at all?
There is no wonder we have a 50 year low in home buying.
Frances, you are correct. You need to figure out the lowest payment for each of your student loans, provide that paperwork to the mortgage company – otherwise they will count 1% of the student loans as a monthly payment.
Some great news related to IBR and Fannie Mae loans:
“Fannie Mae Unveils New Program For Student-Loan-Laden Borrowers”
“Lenders may use the student loan payment as it appears on the credit report for qualification. Period.”
https://themortgagereports.com/27673/mortgage-approvals-get-easier-for-mortgage-applicants-with-student-loans
Who knew that there were different credit reports! On the regular consumer credit report, my IBR payments are shown. I thought I was golden to qualify for the Freddie or Fannie. Evidently, the credit report that a bank sees, does not show my IBR payments, just the standard full payment if the loans were to be paid off in 10 years. How do I get “that” credit report to show my IBR payments?
Tracey! Great news! If you take the paperwork you have from your servicers about your student loan debt, and give that to your mortgage lender, this can very easily be fixed! Now, it is only going to be fixed for the report THAT lender has, so be sure to send it to the Lender that you want to do your mortgage with! Yeah!
I read that fannie mae will no longer use this rule, they will only count actual payment. Also, if someone else is paying credit card or student loan bills for you, example a parent (and you can prove it). they wont count that debt either
https://www.usnews.com/education/blogs/student-loan-ranger/articles/2017-05-03/new-fannie-mae-rules-help-home-buyers-owners
YES! This is great news! I’ve written some details about the mechanics of how the Fannie Mae loan works, what Down Payment options are available HERE. I’ve also update THIS Blog Post regarding IBR Status with the most up to date information!
Hi Eleanor,
My husband and I would like to try to purchase a home, as our rent is much higher than what we would probably pay in mortgage. I have about $140K in student loan debt ($130K mine and $10K that I cosigned for my brother, who is still in school), a decent credit score, and the higher of our two incomes. I am on the RPAYE plan and pay $0 monthly for my loans. I have been on this plan for the past 3 years. My husband is a Vet with no student loan debt but a low credit score and income lower than mine (our combined income is around $100K). We are both first time homebuyers.
What options do we have in terms of buying a home?
You should work to get his credit scores up so you can get a VA Loan. That is the BEST option for you. If you are in NC, please call us at 919 649 5058 and we will be glad to help you with that, there are several things you can do to help him. You can add him to one of your credit cards that has a low balance, you open a couple of secured cards for him. He just needs good new credit added to his file. Don’t try to settle old collections, etc until you speak with a Loan Officer. Best wishes!
Frustrated yet hopeful! I just left my credit union where I was applying for a mortgage. I have about 40K in student loans and make right over 50K. For the past five months I thought i had been doing everything right, paying down balances on credit cards, paying off items in collections, getting my student loans at a manageable payment option ($0 under the IBR plan). But apparently that was not enough as the bank just low balled for only being approved 100K for a mortgage. Which in Wilmington does not buy a home. I am having the same problems as everyone else, they are using my 1% instead of what my actual payment is. Credit Score is currently about 590 so I was relying on the credit union to come through and was also looking into USDA loans since they offer 0 down options but I need a higher credit score for them. But now I am worried that even with higher credit score that my options for obtaining the 160K I need for a home is slim to none based on the 1% of student loans. What would you suggest?
Chris, if this is in Wilmington, NC – call me. We were just there last week! You have options for no down payment, and we can do a credit simulator to tell you what will raise your scores the fastest. Paying collections off is not always needed.
Great! Thank you, calling now!
Hi Eleanor
I believe I might be in a unique situation. I’ve been making IBR plan payments of 464 a month for years. If this were the only issue, I could apply to Freddie Mac. However, I also have an IRS lien that I’ve been on a payment plan for 4 years. This is alright for FHA but not for Freddie Mac (FHA doesn’t do IBR). It’s a catch 22.
I have a good income and my credit score is in the 660 range.
Is there any hope. Is there any other programs to look into? Unconventional loans? Portfolio loans? I’m at a dead end. Oh, I’m in North Carolina.
Thank you for your help.
Bret
Bret, I apologize for the delay, it’s June and I’ve been slammed. Have you called us? I think Elaine has some good information for you (she is one of our Team Mates). You can reach us at 919 649 5058.
I have students loans that, for years, kept me from purchasing due to the underwriting guidelines regarding Income Based Repayment Plans. However, I did my own extensive research and found that USDA – yes, USDA – WILL ACCEPT IBR payments, even if it is zero dollars per month!! I strongly suggest that anyone reading this contact their local USDA office and inquire about the DIRECT LOAN. Also, you can just visit their website and read for yourself!! There are guidelines that must be met in order for USDA to accept the IBR payment, such as your credit score must be at least 640 and you cannot have delinquencies on your credit report and your loans must be in “repayment” status. The only difference between the direct and guaranteed loans is that the borrower must submit a Direct Loan application directly to USDA rather than going through a mortgage company. Just cuts out a step and gets the ball rolling. Their process does take some time (approximately 30 days for approval), but if you are in the same situation that I am, then the wait is worth it!!
I forgot to mention an important detail about the DIRECT LOAN with USDA. There is also an income requirement that also must be met. For example, for a family of two – in my area – the applicant cannot make more than $35000 per year. It is based on family size, income, and geographic location.
Still this is useful information, especially for those recently graduated who may not be earning top dollar just yet. Regardless, it is worth looking into!
Why oh why aren’t you writing loans in Florida, Eleanor? You are so fabulous and have been completely amazing with updates and information over the last year. Thank you so much for all of this. Hearing that Fannie Mae changed the rules for IBR earlier this year has made me incredibly happy. I can finally begin the hunt for a house after many long depressing months. 🙂
Beth, we have a loan office in Tampa now! You can contact Michelle Piccari who is the manager. She should be able to help you! Thank you so much fr your kind words!
We do not have confirmation that USDA Direct will work, but it would be FABULOUS if it does! Thanks for sharing!
Hi Eleanor I come on here at least once a month to read updates and it gives me hope to hear so many like me are in the same boat and have been successful when getting approvals. I have about 130,000 in student loan debt have finally improved my credit over the last 2 years. My middle score is 696. I am on an IBR with 0 due and was told I would need to work out a payment agreement with my lender in order for them to not have to use a 1% is this accurate and also, Do you have a contact for Massachusetts?
Ana! You are doing all of the right things! You can talk with John Burde. He works with us there 🙂
Hi this is Rose and I just signed a contract and thought everything was going well and then I was hit with the same news that FHA wanted an amortized loan statement which Navient said they never give. FHA won’s accept their letter stating their reasons. Therefore, I am being forced to get a conventional loan with a much higher down payment. I know I have a lot of student loans around $400,000 (for a period of nearly 20 yrs. of college) because I had them consolidated several times not knowing or realizing that my interest rate would become the highest of the loans consolidated. i am so disappointed because since I tried purchasing a home in 2015 FHA has changed their requirements at least 4 times. Just when I thought I had everything done this time. I hope it is something we can all do collectively to fix this problem.
Peace unto each of us as we endure these disappointments.
By the way, thank you Ms Eleanor, you are a true jewel, and I don’t post often but I read them and I feel that we have a friend in you who really cares. Blessings to you and your family, for all you do for us.
Dr. Rose
Rose, you are talking to the wrong people. You should only need to make a 3% down payment. You need to talk to a Lender who does the Housing and Finance Programs for your State. We are among the TOP Lenders in our office for NC Housing. These Agencies have down payment opportunities for first time home buyers, and Mortgage Tax Credits. The PMI on the loans offered through these agencies are also significant;y less, and they generally require a 640 credit score.
Don’t give up! Home Ownership Dreams can come true!!
Hi Ms Thorne,
I am in a similar situation as many of the people who have visited your site. I have good credit Experian score is 795. I’ve saved a good amount and have recently been approved for a grant with the city and my employer for an extra $6k. Now that I am in the process of seeking pre-approval, I have been turned away by several credit unions since my student loans are $140k. I am a teacher and acquired extensive loans while attending a private graduate school. My income is about $34k gross annually. It looks like with the new guidelines, Fannie Mae may be my only hope, (however under IBR i’m at a $0 monthly payment – however, i can recalculate this and it will increase to around $200/mo under 2018 income)
The problem I’m encountering is that most banks use Freddie Mac and not Fannie Mae in my area (upstate NY). Any contacts or advice?
You’ve done your homework! Yes, you are in the Fannie Mae Box. The State of New York has a finance Agency. Here’s a link to participating lenders. I think one of these lenders will be your best chance of reaching your goals in 2018. CONGRATULATIONS!!!
Hi Eleanor, thank you for this. I previously purchased a home 2014 before the FHA changes and while I was still in college. Now I have a family and we need more space. I have loans almost at $80,000 that are still in deferment because I am in grad school. When I looked up what my IBR payment would most likely be and it say around $300. Would it be a problem trying to do Fannie Mae?
Kirsten – it would not be a problem going Conventional, and there are down payment assistance programs available. If you are in NC, please cal us at 919 649 5058
Hi Eleanor,
So, let me first say that it is great relief to see others having the same/similar conversations with IBR. So, I need a little help if you don’t mind.
My credit is 820 and I only have student loans as bills. I have recently consolidated my student loans (about $290.000) and I have a payment for 12 months under the IBR plan. I am trying to figure out my options for mortgage lenders to buy a new home, as well as programs for down payment assistance. I am in the state of GA and an educator.
Can you explain some of my options, please?
Thanks,
Janei
Janie! Congratulations on your decision to buy a house! Depending on your income and credit score, and where you want to live in Georgia, there are 5k, 7500 and 15k down payment assistance programs available. I’m not a lender in that State, but my suggestion is that you contact someone on this list. I found that the website works best in Chrome, just thought I’d let you know… You are looking for a Conventional Program with Fannie Mae. Our Housing Authority in NC only works with Fannie Mae, I can’t tell from the Georgia site what they do. I can tell you there was a Seller Servicer call between Underwriters and their policy staff to answer Underwriter Questions last month. In the call, it was specifically asked about Student Loans:
QUESTION: Credit – Student Loans (Reference B3-6-05 Monthly Debt Obligations – Student Loans)
Some income-driven repayment plans allow a borrower’s payment to go to $0. In that case, how is the student Loan payment calculated?
ANSWER: As long as your can provide documentation showing the income driven payment is $0, you can qualify the borrower with $0 for the monthly qualifying payment.
OUR COMPANY STANCE: We are to take the paperwork given us by the borrower and send that to the credit bureau for them to reflect IBR (or income driven repayment plan) on the credit report with the actual payments – and no end date. Most of the letters we are seeing have an end date on them, and that becomes tricky for Underwriters… so this is how we are handling that issue. If you are talking to a Loan Officer who doesn’t know as much as you do, call the next guy on the list, or tell them to call me. 🙂
Hi Elanor,
I’ve been combing through your page and I find it very resourceful. My fiance and I live in Ohio. we’ve been having trouble qualifying for a mortgage loan because I have roughly $74,000 in student loan debt and my IBR payment is $0. We want to qualify for an FHA 203K rehab loan and we have a particular property selected but our debt to income ratio is too high because of the 1% of student loans taken into consideration. One place recommended an Extended Repayment Plan for my loans. Am I right in my understanding that FHA will NOT consider even a small payment per month on an IBR plan? If I had an IBR loan that required me to pay, let’s say $50 a month, would that work or would they still take the 1% of the total balance because it’s higher?
Thanks,
Elizabeth
For FHA, you are correct – you can either have a 1% calculation, or you must have a level payment student loan payment, that will be verified during the process. Unfortunately, for this purchase, it sounds like you need to look at a different home, or get a non owner occupied borrower to go on the loan with you. Best of luck!
Hello Eleanor. I have been reading through this thread and finding it very informative. I am a single mom and new grad. I have about $29,000 I’m student loans. I make just under $55,000 annually as a RN and my middle score is 647. I am having a hard time with lenders getting approved. I am on an IBRP and have a payment of $50. Do you have any leads for lenders in the Cleveland, Oh area. I have 3 children and I’m trying to buy before the start of the next school year. Thank you for any advice
I’ve referred your information to Cathy Ortega Contreras in our Dublin, Ohio office. She knows how to make these loans work, and will help you everyway she can. Congratulations! You have decided to buy a home for your family!!!
Thank you! Hopefully she is able to help!
Hello Eleanor, I have been reading all comments. This is my situation. I am currently on a IBR program that states I pay $0.00, which shows as such on my Credit report- I have made adjustments to pay $55 dollars starting next month although it will still show I am on the IBR program. I owe 10K on student loans so not much. My credit isn’t the best 632 but I have managed to have good credit history, although there are some medical collection debts (around 8K) from 2010 I think. I make 60K a year and will be making 65K in the next month or two I have been employed at the same company for 8 years- now a call center operations manager. I live in Phoenix Arizona- really looking forward to buy a home around the 250K mark possibly. What is the best loan for me, or what route should I take. Should I better my credit? should I change from the IBR plan. what loan works best for me? What down payment should I be ready for? I should mention that my debt currently is ( Car- 730 Insurance – 100 – and well any utilities ) I am unsure of what my Income to ratio is.
Yes, I just closed with Cathy Ortega Contreras in Columbus, Ohio!! She’s great. I’m a single mom on IBR with high loans. We did a conventional loan. No issues at all. Everything went smoothly.
Cathy work with us in Ohio! I’m so glad this was a positive experience for you!
Natalie, I’m so sorry for the delay, we’ve been on Vacation! I would suggest contacting one of the Loan Officers on this list. They focus their business on First Time Home buyers, and can give you the personalized checklist you need to buy a house! Congratulations! You are going to be a Home Owner! https://housing.az.gov/sites/default/files/documents/files/HOME-Plus-TOP-Producing-Particpating-Lender-1.2.2018.pdf
Hi, Eleanor. I’m in Austin and have already had two situations where my lender had pre-approved my home and then it fell through due to the 1% issue (my loans total $120k!). I had already explained this to the second lender, because I didn’t want to go through that painful situation again. She said it was fine and then, of course, it wasn’t. The builder had been sending us daily photos of the our home being built, and this was devastating!
My credit is good and my income is also good, but the DTI is a killer with this loan debt. I just recertified my repayment under the REPAYE IDR. Reading your posts, it looks like this is a mistake, but I can’t afford the almost $500 payment on a traditional repayment plan and also make a house payment. I just submitted the application Monday. It hasn’t been approved, so I actually could change it if this would help. Maybe temporarily and then request a forbearance or deferment (or a IDR) after the home is purchased? But I don’t want to if I’d still be over my DTI even at a $500 payment. I am also on a PSLF program. About half completed.
1. Is there any hope for us?
2. Do you know of any Austin lender who actually understand the loan process?
3. Is there a way to communicate with you privately?
THere is hope – you need to talk to someone on this list – you want a Fannie Mae Loan. Here’s the link to lenders who should be familiar with your situation. I’m so sorry you’ve had this problem!
https://www.tdhca.state.tx.us/homeownership/fthb/fthb-lenders.htm
Hi Eleanor! Can you recommend a fannie mae lender in TN? I am on IBR (repaye), have a solid income & excellent credit score, but I’m afraid the 1% balance thing will be a no-go. I need a lender who will use my actual IBR payment as shown on my credit report. Thank you! Hope you know of someone who can help.
Here’s the list of approved Lenders in Tennessee for various First Time Home Buyer Programs. They don’t list the actual loan officers who are Top in the State, like they list us here in NC, but I understand that Gary Robillard might be a good contact. Here’s his contact information. Best Wishes!!
Hi Eleanor, what would you recommend for two professionals with $500K combined in student loan debt ($1700 total monthly payment in IBR), with income of $250K. Is Fannie Mae the best option given that it always uses the monthly payment reported on the credit report? Can you recommend a lender in PA who will understand these rules?
Sorry for Delay… we had a hurricane. Yes, please call Christina Ralston – she understands how this works. There’s a chance that in 4 weeks or so Freddie is going to have a better option for you. They are going to let us use what is reported on the Credit Report (just like Fannie) and they are making some changes to the Home Possible Program. Christina 412 334 1342 – tell her I sent you 🙂
Hello. I am in ibr. My payments show on my credit report and I have a letter from my student loan lender showing my payment amount and balance. No wording at all about ibr on the doc. We are applying for a FHA loan. Will I be okay or will the underwriter still factor in the 1%? As of now, they know nothing of my ibr.
Jane, unfortunately, what you are describing here is fraud – so I can’t really advise you.
Hi Eleanor, I keep up with this blog and receive notifications when people ask you questions as well as your replies. Can you explain how what Jane is describing is fraud, just to be clear….
Here’s Jane’s question:
“Hello. I am in ibr. My payments show on my credit report and I have a letter from my student loan lender showing my payment amount and balance. No wording at all about ibr on the doc. We are applying for a FHA loan. Will I be okay or will the underwriter still factor in the 1%? As of now, they know nothing of my ibr”.
Thank You
Brittney and Jane, If you are applying for a loan, and you know your payments are in IBR, but you don’t give all of the information to the Loan Officer, then that is a misrepresentation. If you have a balance of lets say, $50,000 in Student Loan debt, and your payments are $75 – then the Underwriter SHOULD ask for evidence that it is in a level payment plan. Typically the payback on a Government Student Loan debt of that much would be close to $450 or $500, meaning somewhere close to 1%. If you don’t tell a loan officer, and for some reason you “slide” through with a FHA loan. There are consequences… The Underwriter license number and the Loan Officer Number has to be recorded on your Deed. It’s public record, so that if there’s ever a bad economy with houses being foreclosed as everyone loses their jobs – they will look at those loans and those loan officers and underwriters.
The BEST program for someone with IBR Student Loans is a Conventional Fannie Mae Loan. They count the payment that is reported. I know this sounds silly – but those are the guidelines we have to work with.
What are typical debt to income ratio limits for conventional Fannie Mae loans?
This honestly makes no sense to me. When applying for a loan they look at you income not projected income in the years to come, so why look at a persons IBR payments past a 12 month period(a lot can happen in 12 months) like loosing a job, your primary income which you were qualified on. I have been on an IBR for a couple years $0/month. When I had an interruption in my education my payments were $0 and that was when it was just me and my husband. When I went back to school and got my degree, then got a job my IBR was still $0 because by that time my family size doubled changing my income threshold. So I have been at an IBR of $0 for years and come to find out the job I have qualifies for a forgiveness option, yet I still could not get a mortgage loan. I have student loan that will be forgiven but it’s still being counted against me.
There needs to be better assessment when dealing with borrowers who have student debt. There are to many different repayment scenarios to just apply the standard rules being used (1%, payment reflecting on credit report). This is not sufficient or comprehensive for such an important decision.
Yes – with IBR plans, you will need a conventional 3% down payment loan. They will count the payment as it is. In most states you can get down payment assistance (mortgage grants) from the Housing Finance Agency. There are only a handful of Lenders that do this program, and we are one of the Top Lenders in NC. If you are in one of the states we service please call us at 919 649 5058
THAT is a BRILLIANT Question! With a Conventional loan we typically see 45 to 46 percent with a 3% down payment. IF YOU ARE USING DOWN PAYMENT ASSISTANCE that goes down to 41%. If you are putting MORE down, at least 10% and have cash reserves after closing, then we’ve seen them go as high as 48%. Here’s more information about debt to income ratios and credit. Please call us if we can help! 919 649 5058
Hi Eleanor,
Can you tell me if i apply for a USDA loan and I’m on a -$0- IBR for my student loans and I owe roughly $34k, will USDA require 1% of my student loan debt or will they not add that into my debt seeing as how I’m in a zero payment IBR?
I am in TEXAS and would like to know who to contact for a USDA loan.
Thank you kindly.
Yes. USDA will count it. You need to call about a mortgage grant / Down payment Assistance. FNMA will count a zero IBR payment right now – subject to change in Jan of 2020. Here’s where the list of lenders for Texas is located.