How To Qualify For a Mortgage With Student Loan Debts

In this blog, we will cover getting qualified for a mortgage with student loan debts. Student loan debts and car payments are the two biggest hurdles in qualifying for a mortgage. Homebuyers can qualify for a mortgage with student loan debts. However, even if the student loan debt is in deferment, the student loan debts will count toward debt-to-income ratio calculations.

Do Student Loan Debts Count As Monthly Debt For Mortgage?

Let’s say for example:

• are repaying your student loans using the standard repayment plan
• which is 10 years
• and monthly student loan payment is $700
• this could make or break an approval to purchase a new home

Imagine getting that payment cut in half or even more, possibly down to zero.

Cost of An Education Price of Student Loan Debts

The cost of education has increased dramatically over the last two decades. Many graduates are looking for ways of reducing monthly student loan debt. The U.S Department of Education reports that the average annual tuition is currently $16,482 for a four-year public school and $34,193 for a private school.

This is up from $8,653 for a four-year public school and $21,373 for a private school in 2000. Currently, there is approximately $1.3 trillion in outstanding student loan debt in the United States. With the increasing cost of tuition, many young students are forced to take out student loans to help with the rising costs of tuition.

Repayment Alternatives To Student Loan Debts

Once student graduates from school, they generally have six months before forbearance ends. Graduates are required to begin making payments. There are many payment alternatives when it comes to paying back student loans. Student loan debt repayments through a 10-year standard repayment plan. This is ideal because you pay the loan off sooner with the least amount of interest, although monthly payments are higher

Student Loan Debts Graduated Repayment Plan

Payments start low, while graduates are new in their careers, and income is expected to increase as they gain more experience in their field. While the payments start low, they get excessively high toward the end.

Extended Repayment Plan on Student Loan Debts

Allows you to pay for a period of up to 25 years, although these are only for loans that are at least $30,000.

Income-Based Repayment Plans on Student Loan Debts

Income-based repayment plans offer individuals an option to pay off their student loan debt based on their adjusted gross income and is a great option for reducing monthly student loan debt. Under these plans, the individual must re-certify each year by providing a copy of their annual federal income tax return. The monthly payment can be as low as $0 every month. Debt can be forgiven after 25 years, although this may be a taxable event (forgiven debt can be counted as income).

Reducing Monthly Student Loan Debts To Lower DTI 

Under HUD Guidelines, all government and conventional loan programs with the exception of VA Loans do not exempt deferred student loans that have been deferred for 12 or more months. Income Based Repayment Plans (IBR) that report to all three credit bureaus are allowed on Conventional loans.

Now, HUD and USDA allow income-based repayment on FHA and USDA loans. FHA and USDA require 0.50% of the outstanding student balance to be used as a hypothetical monthly debt. VA allows deferred student loans that are deferred for longer than 12 months to be exempt from DTI Calculations. VA requires underwriters to take 5% of the outstanding student loan balance and divide it by 12 months.

Forgiveness of Public Student Loan Debts

An individual that works for a government organization, not-for-profit, or serves in AmeriCorps or Peace Corps, may qualify after 120 payments and 10 years of work history in public service. The individual must be making payments through an income-based repayment plan to benefit. Under an income-based repayment plan, a student can virtually pay nothing toward their student loans. After 120 months, the debt will be forgiven and in this situation would NOT be a taxable event.

Choosing The Best Way To Structure Student Loan Debts For Mortgage

When applying for student loan repayment programs, one needs to consider their personal financial situation. Currently, a married borrower can file married filing separately. They exclude the spouse’s income from the household income calculation. This may benefit those borrowers who earn less income than their spouses and their spouses do not have student loan debt. You would need to be sure that a married filing separate filing status would financially benefit you as you would lose credit for child tax credits, child care costs, education credits, and possibly other deductions.

Best Mortgage Lenders For High Student Loan Debts

This article on Reducing Monthly Student Loan Debt was written by Michael Gracz of Mortgage Lenders For Bad Credit. Michael Gracz is the National Sales Manager for Mortgage Lenders For Bad Credit, Inc. Michael is also an associate moderator for Mortgage Lenders For Bad Credit online forum. Mike is a producing loan officer with Mortgage Lenders For Bad Credit. Armed with a Master of Business Administration degree and a Master’s degree in accountancy, Mike is an expert in all areas of accounting and audits. Mike is an expert on FHA Loans, VA Loans, USDA Loans, and Conventional Loans

Mike is known nationally and due to being associate editor-in-chief for California Loan is well known in the Sacramento Real Estate community as the go-to lender for tougher and creative deals. Mortgage Lenders For Bad Credit, Inc. is a national mortgage company that is licensed in multiple states.

With a nationally known reputation for no lender overlays and working with borrowers to make the deal happen Michael has a national five-star reputation. A mortgage loan denial does not exist in Mike Gracz’s vocabulary. All of our pre-approvals at Mortgage Lenders For Bad Credit, Inc. will not get closed but closes on time.

Starting Pre-Approval Process With Mortgage Lenders For Bad Credit With No Overlays

Michael Gracz of Mortgage Lenders For Bad Credit, Inc. fully understands that the pre-approval stage is the most important phase of the mortgage process. The main reason for last-minute mortgage denials is due to the loan officer not being diligent when issuing a pre-approval to the borrower. Due to Mike’s expertise in accounting and financial audits,

Mike is Mortgage Lenders For Bad Credit, Inc.’s chief income calculations expert for our licensed mortgage loan officers. Calculating income is extremely complex for self-employed borrowers who have multiple corporate tax returns. Mike is a team player and a natural-born leader and our whole team and staff look up to him for his expertise and guidance and leadership.