Conversely, a government-insured loan type such as an FHA loan, is a bit more forgiving. If the student loan is deferred for 12 months or longer the lender does not need to account for the liability.
FHA changing guidelines on deferred student loans – 6/15/15. If the actual monthly payment is not available for installment debt, the mortgagee must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment. For a student loan, if the actual monthly payment is zero or is not available,
FHA Student loan guidelines 2017. deferred student loan payments mean that for a period of time, borrowers are not required to make payments. Although, borrowers may make payments during this period. Another popular option for student loan borrowers is called Income Based Repayment or IBR.
The FHA used to allow lenders to exclude student loan debt from a borrower’s debt-to-income ratio if the payments were deferred. Debt-to-income ratio, often called DTI, is a calculation that helps.
If the loan is in deferment or forbearance, the number used to calculate DTI the greater of: 1% of the outstanding loan balance, per month; $10 per month; VA. If the student loan is in deferment and repayment is not scheduled to begin in the next 12 months, it doesn’t need to be included in DTI.
Because FHA was one of two loan programs which did not require the use of a payment in the debt to income ratio if the student loan was deferred greater than one year after the FHA closing. This was quite the advantage for these borrowers.
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FHA’s new 4000.1 handbook states lenders can no longer exclude deferred student loan debt payments from a borrowers DTI ratio. This change in how fha treats deferred obligations takes effect September 14, 2015, and may significantly reduce how much a buyer qualifies for when using FHA financing.
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To lenders student loans show up as "debt" and debt is something that has to be considered when figuring the debt-to-income ratio. How the debt is figured can vary. One approach is to simply look at the payments actually being made and have them count in the DTI ratio.
My borrower has applied for an FHA loan to buy their first home, and they have several student loans in deferment. The monthly payment on their credit report is $0 but the underwriter said we must use.