Buying House With Student Loan Debt And Qualifying For A Mortgage

This Article Is About Buying House With Student Loan Debt And Qualifying For A Mortgage

Buying House With Student Loan Debt And Qualifying For A Mortgage can often be a hurdle for homebuyers. College tuition and fees can surpass $50,000 annually. Many college graduates have student loan balances north of $100,000 plus. Those with master’s and/or professional degrees often have student loan balances over $250,000 or more.

The average starting salary for recent college graduates with no work experience is $48,000 per year. For those with master’s and/or professional degrees, their starting salaries average $63,500. Many college graduates have their student loans in deferment for many years until they make good salaries where they can afford them. However, many cannot afford to make fully amortized student loan payments. Buying House With Student Loan Debt And Qualifying For A Mortgage is possible.

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Hurdles With Buying House With Student Loans For Recent College Graduates

There are hurdles Buying House With Student Loan Debt. This holds especially true for recent college graduates with high student loan balances. The common word on the street is that it is impossible to buy a home right out of college with high student loan balances. This is not the case at Gustan Cho Associates. Over a quarter of our borrowers are first-time homebuyers who recently graduated from college with student loans.

More than 44 million graduates of colleges and/or technical schools owe over $1.5 trillion in student loan debt in the United States. 2.3 million people owe student loan debts with at least a $100,000 loan balance. Over $32 billion in student loan debt is past due 90 days or more. Over $900 billion in student loan debts are owed by borrowers who are 40 years or younger. The biggest hurdle with buying a house with student loans is the debt to income ratio. With the exception of VA Loans, loan programs take into account deferred student loans when qualifying borrowers.

HUD And USDA Guidelines On Student Loans On FHA Loans

HUD and USDA have the same student loan guidelines when it comes to qualifying for FHA and USDA Loans. HUD, the parent of FHA, and USDA require a monthly fully amortized student loan payment to be used. Deferred student loans do not count.

Income-Based Repayment (IBR) is now allowed on conventional and FHA loans. The borrower can get a hypothetical fully amortized monthly payment over an extended-term in writing by the student loan provider. The hypothetical monthly payment can be used on student loans that are on deferment and/or on IBR if the amortized payment is lower.

If the borrower cannot get a fully amortized monthly payment by the student loan provider, both HUD and USDA require the lender to take 0.50% of the outstanding student loan balance and use this amount as a hypothetical monthly debt of the borrower.

Buying House With Student Loans With VA Home Loans

The Department of Veterans Affairs (VA) has the laxest guidelines when it comes to buying house with student loans. The VA is the only mortgage agency that allows deferred student loans to be exempt from debt to income calculations. This only holds true if the student loans have been deferred for longer than 12 months.

Otherwise, for non-deferred student loans, the following applies:

The VA will accept a fully amortized monthly payment over an extended term
IBR Payments are not acceptable
Or the VA requires to take 5% of the outstanding student loan balance and divide that figure by 12 months

The resulting figure will be the hypothetical monthly payment to be used on VA Loans.

Buying House With Student Loans With Conventional Loans

Conventional Loans is the only loan program that allows Income-Based Repayment (IBR). This only holds true if the student loan provider reports the monthly IBR Payment on all three credit reporting agencies. In the event, if the student loan provider does not report the IBR on all three credit bureaus, the loan officer can do a rapid rescore. A rapid rescore normally takes 3 to 5 business days.

Non-QM Loans normally accept deferred student loans. This only holds true if the deferred student loans have been deferred for longer than 12 months.

For more information about the content of this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.